Hey guys, I'm in the process of purchasing a car for my wife and I had a quick question. She would be trading in her car for which a 13k balance remains on the lease - they are going to give her 13k for it and pay it off. My question is, would that 13k be deducted from the total taxable amount of the new car? I wasn't sure how it worked when trading in a lease. We are in pa by the way.

Thanks

 

Not certain how this will work.

Pennsylvania has a "money difference" for trade ins. Tax is calculated AFTER subtracting trade in value.

A lease pay off is not a true trade in. In other words the car is not yours to trade. What appears to be a single transaction is actually two unrelated transactions, and does not qualify for money difference.

 

Is it a lease car?

 

Normally when a car is leased, the sales tax is included in the monthly payment. Since you have not paid the sales taxes on the remaining lease payments, no sales tax would be due you in this transaction.

 

You will pay full tax on the new car unless you get a credit on the trade-in car. It is suspicious to me, however, that they will give you/her exactly the trade-in amount. Did you negotiate the new car purchase first then the lease trade-in? If not, I'd do it this way at another dealership. You are in Philly, not BFEgypt - there are dealerships everywhere. When you do these negotiations independently, you usually get better a better deal since nothing is hidden. Use Edmunds.com to help with fair values for each.