my trade-in: some interesting facts (archive)

In Washington state, at least, you pay sales tax on the value of the car you've purchased MINUS your trade-in. This is often given by dealers as a reason for you to trade-in instead of selling privately (even though the retail value of a trade-in is almost always going to exceed the wholesale value by more than the ~8.7% sales tax). But did you know that your dealer can handle a private sale as a trade-in? Mine (Jean-Marie Vidal at BMW Seattle) did, and so I got the best of both worlds - $3000 more than I was offered as trade-in, PLUS the sales tax advantage (over $1700 for me).

To do so, I just brought the buyers to the dealer, who did all the paperwork. And the buyers actually saved money because they paid the dealer the sales tax on the actual transaction price, whereas if they had paid sales tax directly when re-registering the car they would have paid it on the NADA price for the car, which is actually somewhat higher than what they paid for it. A win-win situation, except for the state which loses a few tax dollars. Imagine my distress.

And by the way, I did this even though my X5 won't arrive for another six weeks, which was advantageous for me for various reasons. This is earlier than dealers will usually take a trade-in (they don't even have a stock number for my X5) but it works out OK for them as they get to sit on what amounts to a $20,000 deposit for 6 weeks. So if this would be an advantageous situation for you, know that it's possible.

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