Trade-in Sales Tax Reduction (in Connecticut)

[pjorg]

Hello All,

My understanding is that in many states (including Connecticut, where I live), the value of a trade is deducted from the price of a new vehicle, and that lower price is the sales tax basis. If I understand this correctly, it's a pretty significant benefit to trade-in vs. private sale, all else being equal.

Let's get it out of the way right now that if the dealer is not valuing your trade well, or if they are otherwise inflating the purchase price of the car (whether with fees or unfavorable financing terms) then all else is not equal and the potential benefit would be lost.

My question is: is there any timeframe that defines what a "trade-in" is vs. a mere sale to a dealer? Does the dealer have to take possession and credit you at the same time as delivery of the new vehicle? Within a week? A month?

Here is my situation:

• I was fortunate to place an order this week
• I currently have three cars, and am selling one since I don't need it if I'm getting the truck
• I have a good offer for it that I am inclined to accept

It seems to me that if my Lightning dealer is willing to match (or even come close) to the private sale offer, and then hold the trade value as a credit toward my eventual delivery, that is almost like getting another several thousand dollars in value. (Connecticut motor vehicle sales tax for vehicles over $50k is 7.75%.)

Of course, no one knows when a truck ordered this week will be delivered—it could be next month, or it could be in the Fall, or it could be next year. Arguably I could just hold onto the trade until delivery, but the used car market right now is very hot and it's conceivable that values drop between now and then.

I welcome your thoughts.

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[VTbuckeye]

In Vermont you have 3 months on either side of the transaction. You can get the sales tax credit at the dealer or from a private sale. I missed out on this last fall/winter with our Chevy bolt buyback. (Started the buyback process in Late July. Bought Volvo xc40 EV on Sept 20, buyback dragged on and finally completed on Feb 7). If the buyback was completed by late December I could have used the 30kbto offset my sales tax on the Volvo (saving 1800). Going the other way if I sell a car now and it takes 4 months for my lightning to come in I would also be out of luck. I like that the sales tax credit does not have to be though a dealer, though the dealer does make it easy. Good luck in CT

 

[pjorg]

To close the loop here, I am told that in Connecticut, the trade-in must happen within 30 days of taking delivery of the new vehicle for the sales tax benefit to be effective.

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