Quote:
Originally Posted by jasin1
That only really works if you have equity in the trade..otherwise they just add your negative equity into the new loan price or require a bigger down payment..either way the taxes would be a wash ? Or am I wrong on this
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This got me thinking about how negative equity that rolls into a new loan gets taxed. In theory, you've already paid taxes on the original loan. If you roll $5000 over from the original loan does it get taxed again? I found this with a quick google:
If the negative equity amount is included by the dealer in the total vehicle price, it will be included in the base on which sales tax must be charged. If it is not included in the total vehicle price, the negative equity amount will not be included in the calculation of sales tax.
If it's included in the total vehicle price you will be paying sales tax twice on that money. Hopefully you live in Montana or some other no sales tax state.
Regardless of the answer, the OP should not trade in a vehicle with negative equity. It's creating a compounding issue that will continue to snowball.