Understanding the tax advantages of trading in your vehicle

July 31 2020,

Understanding the tax advantages of trading in your vehicle

You may have heard that there are tax advantages to trading in your vehicle, but you are not sure how that works exactly. Let’s give you a quick overview with an example.


Let’s say that you sell your vehicle for $20,000, but the dealership gives you $17,000. You decide to apply the $20,000 to the price of your next vehicle that cost $30,000. The $30,000 plus tax equals roughly $34,500. Your $20,000 will be reduced from the $34,500 to give you a net cost of $14,500 including taxes and dealership fees.


The trade-in is actually applied before taxes. That means that we take $30,000 and reduce $17,000 which equals $13,000. The tax is then added to the $13,000 which equals $14,950. In the end, selling the vehicle yourself nets you only $450. If we give you $17,500 for your trade-in, then you come out on top.


This is just an estimation of course, but you can see how this could be beneficial to you.


Regardless, there are often costs associated with selling a vehicle and these costs can add up. Things like taking an ad online or repairing the vehicle before selling it can quickly hurt your profit margin. Sometimes, it’s easier to simply give the keys and enjoy your next vehicle with complete peace of mind.


Other Articles That May Interest You

Mazda Develops SKYACTIV-Z Engine for 2027 CX-5 Hybrid

March 27 2025

Mazda Develops SKYACTIV-Z Engine for 2027 CX-5 Hybrid

Mazda has unveiled its next-generation SKYACTIV-Z engine, set to debut in the 2027 CX-5 Hybrid. This innovative powertrain will form the backbone of Mazda's small vehicle lineup during the electrification era, delivering exceptional fuel economy while preserving the responsive performance drivers expect from the brand. The announcement came during a Mazda Multi-Solution Briefing Session in...
Why the 2025 Mazda CX-50 Is Breaking Sales Records

March 12 2025

Why the 2025 Mazda CX-50 Is Breaking Sales Records

The numbers speak volumes – CX-50 sales jumped a remarkable 81.0 percent year-over-year this February, setting a new record for the month. This impressive growth isn't surprising given the substantial improvements and expanded options Mazda has introduced for 2025. With sales increasing by 56.3 percent year-to-date compared to 2024, the CX-50 has quickly established itself as one of Mazda's...
Logo Access 360