Question about car downpayment

[Argo]

When making a downpayment on a new car, can I make that money count only towards sales tax? In other words instead of putting down $3000 and financing the rest, I use that $3000 to only pay the sales tax. Monthly payment amounts would be the same in both cases, however, the second case would allow me to deduct the sales tax on my federal tax return later next year.

 

[kranky]

I don't follow your question. Even if you finance 100%, you are still paying the sales tax now and could deduct it.

Look at it this way - even with 100% financing, the finance company is lending you the money to pay the sales tax. You still paid it.

 

[Scarpozzi]

Here in the state of TN, sales tax is taken care of at the title office. So...if you buy a car at the dealership, technically, you don't have to pay tax until you register it.

If they take care of that at the dealership, the $3000 can take care of the tax first, but either way you're going to be paying the same since you're going to have to finance the rest.

BTW: My first comment about paying tax at the office... I once bought a vehicle in GA. I didn't pay tax on it until 13 days after I bought it....I think I had 14 days to pay it since that's how long the temp tags were good for. 😉

 

[Argo]

Originally posted by: kranky
I don't follow your question. Even if you finance 100%, you are still paying the sales tax now and could deduct it.

Look at it this way - even with 100% financing, the finance company is lending you the money to pay the sales tax. You still paid it.

Correct, but if you finance the tax, then you pay it over time (especially true for leases) and you can't get one receipt that you can submit to IRS. Or am I wrong on this?

 

[kranky]

I have no idea about leases. But if you're buying a car, Your sales contract will show the sales tax amount. I don't think you'd need anything else. You can't really "finance the tax" anyway. You can borrow money which you use to pay the tax now.

Since the state must have their tax money now, that must mean you paid it now, right? Whether you borrowed money to pay it now is a different issue.

 

[Grouchyoldguy]

You pay the tax up front. The finance co. just lends you money to pay what you owe.

 

[vi edit]

The tax for leases depends on the state. In many states you only pay sales tax on your monthly payments.

If your monthly payments are $300 a month, you only pay sales tax on $300. You only pay tax on what you use.

If you outright purchase a car and finance it, you pay the full amount of sales tax due on the purchase price of the vehice at the time of the purchase. In many states the only way to reduce that is to have a trade in vehicle. The trade in amount reduces the sales tax due.

If you are buying a $20,000 car, and have an $8,000 trade in, you only have to pay sales tax on the difference of $12,000.

Again, it varies by state.