Can you get cash back for a trade?

[jimothy]

As some already know, I’ll soon be selling my 2019 Laramie to get a 2021 Longhorn. I’ve got a bit north of $30,000 in equity in the Laramie. I’ll also be getting 0% for 72 months on the Longhorn.

At zero percent, it doesn’t make sense to put $30K+ down, when I could keep it in the bank, buy accessories for the new truck, invest in dog money, whatever.

If I sell my truck rather than trade it in, I can put some of the proceeds as a down payment on the new truck, and do what I please with the rest. But then I lose the tax benefits of trading in, which works out to be about $3,000.

Can I trade in and get a check for part of the equity? I will ask my dealer, but I’m curious if anyone has done this before.

 

[alpha_brit]

As some already know, I’ll soon be selling my 2019 Laramie to get a 2021 Longhorn. I’ve got a bit north of $30,000 in equity in the Laramie. I’ll also be getting 0% for 72 months on the Longhorn.

At zero percent, it doesn’t make sense to put $30K+ down, when I could keep it in the bank, buy accessories for the new truck, invest in dog money, whatever.

If I sell my truck rather than trade it in, I can put some of the proceeds as a down payment on the new truck, and do what I please with the rest. But then I lose the tax benefits of trading in, which works out to be about $3,000.

Can I trade in and get a check for part of the equity? I will ask my dealer, but I’m curious if anyone has done this before.

I believe you only get the tax benefits for the portion of the trade-in that is put towards the new vehicle. So lets say you trade in and get $30k - if you receive a check back for $20k of that, I believe you only get the tax benefit on the $10k that went toward the purchase. Not sure that answers your question, but I am guessing it's possible to do it. The question is whether it is worth the $1k benefit when you'd likely get more selling it outright?

 

[jimk hunt]

I believe you only get the tax benefits for the portion of the trade-in that is put towards the new vehicle. So lets say you trade in and get $30k - if you receive a check back for $20k of that, I believe you only get the tax benefit on the $10k that went toward the purchase. Not sure that answers your question, but I am guessing it's possible to do it. The question is whether it is worth the $1k benefit when you'd likely get more selling it outright?

This is correct. and as you know in Georgia, you will pay around 6%. So at least mathematically you should not ask for cash back. I hate the way GA taxes vehicles vs the old ad valorem.

 

[afphinfan]

My understanding was as alpha_brit stated: only getting tax benefit of the downpayment amount. I traded a truck in earlier this year and only paid the difference but then sold that new truck to Carvana and bought my current truck from out of state. I had to pay $1k when I went to register but I will be able to use both amounts come tax time ... certainly won't be a one to one but what I sold to Carvana definitely made it worth it.

 

[jimothy]

Thanks for the information, all.

So does that mean there's no tax benefit on portion of the trade in that goes to pay off the existing loan on my old truck? Say these were the numbers (rounding to nearest $5K to keep things simple):

Price of new truck: $60,000
Value of old truck: $45,000
Amount owed on old truck: $15,000
Equity on old truck: $30,000
Georgia new car tax: 6.6%

Assuming I put the entire proceeds of the trade to the new truck, do I get tax savings on $50K (value of trade in), or $30K (equity on old truck)? That's a difference of $1,320.

 

[afphinfan]

If they give you $45k on trade-in and your purchase price is $60k then you will pay tax on the difference ($15k). The amount owed, etc. has no bearing.

 

[alpha_brit]

Thanks for the information, all.

So does that mean there's no tax benefit on portion of the trade in that goes to pay off the existing loan on my old truck? Say these were the numbers (rounding to nearest $5K to keep things simple):

Price of new truck: $60,000
Value of old truck: $45,000
Amount owed on old truck: $15,000
Equity on old truck: $30,000
Georgia new car tax: 6.6%

Assuming I put the entire proceeds of the trade to the new truck, do I get tax savings on $50K (value of trade in), or $30K (equity on old truck)? That's a difference of $1,320.

This is what I'm finding on that (I've never traded a vehicle with an outstanding loan, so no first-hand experience) from the website www.trustauto.com/blog/advantages-of-trading-in-your-car/

"Sales Tax Savings with Trade-ins
One of the greatest benefits of the trade in format, comes with how sales tax on your new purchase is calculated. Across most of the country, when you trade in a car to purchase a new one, you will get some sort of sales tax credit based on the value of your trade. What exactly does this mean? States which allow a sales tax credit for a trade-in, calculate the tax you will have to pay on the final purchase based on the cost after the value of the trade is subtracted from the cost of the new vehicle. For example, if you are buying a new car for $20,000 and the dealership offers you $8,000 for your trade-in, you will pay sales tax only on the $12,000 difference! The existence of a bank lien payoff has no effect on the sales tax calculation. Whether the trade-in is owned free and clear with no bank lien, or the lien payoff is thousands more than the actual value of the vehicle, the sales tax savings will be the same. Any lien, or no lien, has no effect on the sales tax savings."

 

[jimothy]

Thanks again, all. As things stand, Mark Dodge and the local Autonation are offering the best trade-in value of my truck (they exactly matched each other). Which makes trading in to Mark Dodge the better deal, even if I do take some cash out, as I'll get at least some tax benefit.

There's still time to sell privately, which could be the best deal overall. Next steps are to keep returning my vehicle to stock (I put the stock wheels and tires back on yesterday, and I am selling the Retrax cover today), then take some glamor shots and list this beauty for sale!

 

[alpha_brit]

There's still time to sell privately, which could be the best deal overall. Next steps are to keep returning my vehicle to stock (I put the stock wheels and tires back on yesterday, and I am selling the Retrax cover today), then take some glamor shots and list this beauty for sale!

Time to update your siggy then, no more fancy wheels. Hope things go smoothly with the new truck, I'm about 20 days behind you at Mark Dodge, but for an economy build. Wish I could've sprung for the Limited but it was just too much

Edited to add: Having serious truck envy, this forum is dangerous!

 

[jimothy]

I might as well share the real numbers: Both Mark Dodge and local Autonation offered exactly $47,000 for my Laramie. Assuming I put the full proceeds towards the Longhorn, the tax benefit of trading in is $3,102. If I took out $10,000, tax benefit is $2,442.

So I'd have to get at least $49,442 or $50,102 from a private sale. That sounds high to me, but maybe there is someone willing to pay that. It's worth a try.

 

[jimothy]

Time to update your siggy then, no more fancy wheels. Hope things go smoothly with the new truck, I'm about 20 days behind you at Mark Dodge, but for an economy build. Wish I could've sprung for the Limited but it was just too much

Edited to add: Having serious truck envy, this forum is dangerous!

You're right about the wheels! But I will be putting them on the Longhorn.

In the meantime, I put the Fuels on my wife's Honda Civic. She's looking sharp!