Tax question on car trade-in in Illinois?

Question

When figuring tax on a vehicle, should the dealer figure the tax before or after the trade-in? A well known dealer I went to said he had to figure tax on the selling price of the vehicle (minus my cash down), then deduct the trade in value of my car for the final loan amount. Is this right? He figured tax on $5400 ($6200 minus my cash down which was $1500), THEN subtracted $1500 for my trade in. Why not tax me after my trade in? Is this Illinois law to tax me BEFORE my trade in?

Answer 1

Your down payment isn't a factor in the sales tax calculation. In nearly all states, you pay sales tax on the net amount of the transaction -- the price of the new car less your trade-in allowance. If the price of the new car was $6,200 and your trade was worth $1,500, you would pay tax on $4,700.

Answer 2

I think that's backwards. Doing it that way wouldn't make any sense - if someone paid cash for a car under than formula (100% down payment) they wouldn't pay ANY tax - and no state is that generous.

It's generally selling price minus tradein, then calculate the tax on that, then subtract the down payment..

Answer 3

Don't know what it is in Ill., but in MO it is after