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GuideSelling Your Car

States That Allow Trade-in Tax Credit

One major benefit to trading-in your used car is most States give you a tax credit when purchasing a new car.

For example, if your new car costs $20,000 and you have a trade-in worth $5,000, then you only have to pay sales tax on $15,000. If your sales tax rate is 10%, you're looking at savings of $500 in this particular case.

The following states currently allow a tax credit on your trade-in as of January 2011:

* The Potential Savings is based on a trade-in worth $5,000

StateMaximum Tax RatePotential Savings *
Alabama 10.5 $525
Alaska 7.5 $375
Arizona 11.73 $587
Arkansas 11 $550
Colorado 10.4 $520
Connecticut 6 $300
Delaware 0 $0
Florida 7.5 $375
Georgia 8 $400
Idaho 8.5 $425
Illinois 10 $500
Indiana 7 $350
Iowa 7 $350
Kansas 9.8 $490
Louisiana 11 $550
Maine 5 $250
Maryland 5.75 $288
Massachusetts 6.25 $313
Minnesota 7.88 $394
Mississippi 7.25 $363
Missouri 10.49 $525
Nebraska 7 $350
Nevada 8.1 $405
New Hampshire 0 $0
New Jersey 7 $350
New Mexico 8.69 $435
New York 8.88 $444
North Carolina 8.25 $413
North Dakota 7.5 $375
Ohio 7.75 $388
Oklahoma 11 $550
Oregon 0 $0
Pennsylvania 8 $400
Rhode Island 7 $350
South Carolina 9 $450
South Dakota 6 $300
Tennessee 9.75 $488
Texas 6.25 $312
Utah 8.35 $418
Vermont 7 $350
Washington 9.5 $475
West Virginia 6 $300
Wisconsin 5.6 $280
Wyoming 6 $300

The only states that DO NOT currently give a tax credit as of February 2019 are:

District of Columbia

If you live in one of these states, you have more incentive to sell your car to a private party.

3 Steps Every Car Buyer Needs to Take to Save Maximum Money

The key to getting the best deal is to gather price or lease bids from as many local dealers as possible. Then shop that best price around until no one can beat it. Here are the steps:

Step 1 Get Prices From My Trusted Network

Select the vehicle you're interested in to see if there are local dealers in my network who will provide you with their best upfront price. You will get direct access to an internet sales manager who you can further negotiate with online (no need to visit dealership).
Select Vehicle to Get Local Pricing

Step 2 Get Prices From TrueCar / CarsDirect

TrueCar, and CarsDirect are my top 2 online price quote recommendations. These services show you pre-negotiated prices from dealers closest to you - and the deals are usually pretty decent. But remember, you can still negotiate further.

Step 3 Complete my Checklist

Follow this up with my checklist to make sure you squeeze out every last bit of savings.
- Gregg Fidan

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About The Author

Gregg Fidan Gregg Fidan is the founder of RealCarTips. After being ripped off on his first car purchase, he devoted several years to figuring out the best ways to avoid scams and negotiate the best car deals. He has written hundreds of articles on the subject of car buying and taught thousands of car shoppers how to get the best deals.
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