The car, the car deal, and the math. Part 3

Posted: June 28, 2011 in Uncategorized

Richard Petty Driving Experience at PIR in Phoenix!

We now have a general idea of how the numbers work for a new car with no trade involved. So far the math has been fairly simple. Today we’re going to throw a trade in into the mix. At this stage I don’t want to get into negotiation about trade values or used car values in general. We will go into that in the near future. For today I want to re-hash the numbers in a car deal using a pre-set amount for a trade so we can look at the numbers again. Our trade vehicle is an exceptionally clean high mileage vehicle, so we negotiate a three thousand dollar trade in amount. For clarity, we’ll use the same new car numbers we did in “The car, the car deal, and the math. Part 2” so we’ll eliminate confusion and you will be able to see the difference having a trade in makes to the car purchase math.

MATH WITH TRADE INSTEAD OF CASH

  1. The price of your car is —————————————-25000.00
  2. The value for your trade is ————————————3000.00
  3. AMOUNT TO BE TAXED IN THE DEAL ———————–22000.00
  4. Sales tax is (see notes below) ———————————-2046.00
  5. Plate fees ———————————————————-420.00
  6. Title fees ———————————————————–4.50
  7. Registration fee —————————————————8.25
  8. Postage fee ——————————————————–4.00
  9. Air pollution fee————————————————–1.50
  10. Documentation fee ———————————————-489.00

Total is —————————————————————24973.25

MATH WITH CASH

  1. The price of your car is —————————————25000.00
  2. The down payment is ——————————————3000.00
  3. AMOUNT TO BE TAXED IN THE DEAL ———————-25000.00
  4. Sales tax is (see notes below) ———————————2325.00
  5. Plate fee ———————————————————- 420.00
  6. Title fee————————————————————4.50
  7. Registration fee ————————————————–8.25
  8. Postage fee ——————————————————–4.00
  9. Air pollution fee————————————————–1.50
  10. Documentation fee ———————————————489.00

Total is —————————————————————–25252.25

 

Notes—- The reason for this simple illustration is to help you understand the mechanics of a car deal. If you think you can sell your car for more money than a dealership will give you, always remember that at a car dealer you are only taxed on the difference between the amount of the new car, and the amount of the trade. If you sell your car for cash, the amount you sell it for had better be at least the amount you want, plus the eventual loss you will experience when you use cash instead of the trade. For older cars, or cars in less than perfect condition, this will be hard to do. As your trade value goes up, the amount saved in taxes on a new car rises as well. Don’t forget to factor this into you trade plans!

Next we’ll talk about trade in values! How are you doing so far? If you have questions please write me at truthbymike@yahoo.com or see my site at truthbymike@facebook.com

 

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