About the $4500 Eco-Credit

[hugedrive]

I just pulled the trigger on a 2010 X5 35d. Got it for $1400 over invoice.

I got a question. My dealer tells me that the eco-credit is deducted from the after-tax amount and not deducted from the taxable selling price. Is this true?

Thanks for your help.

[Penguin]

Probably.

It depends on your state's law. In Illinois that is true -- the tax is before any Rebates or incentives.

[robert47]

Would anyone know the law as it pertains to California? I'm visiting a dealer tomorrow.

[dmfelger]

No mention of the Eco Credit on my invoice. They just subtracted the $4500 from the sticker. Bought it 8/2/09.

[robert47]

Thank you for the information. One dealer quoted me $750 over invoice when I was looking at the 09's but failed to mention the eco credit?? I just discovered that Kelly Blue Book now has invoice prices on options and packages for the 2010's on line (Edmund's doesn't have them up yet). Nice information to have to keep the fellows honest.

[hugedrive]

There's no mention of the credit on my invoice either, but I know the dealer subtracted the $4500 from the after-tax price. I guess want I to know is whether or not the $4500 should be deducted from the before-tax sales price (thus lowering the out the door after tax price).

[Lubehead]

Maybe I don't understand but it seems to me that the answer is clear. The dealer is suggesting that they will tax you on a number that is not the actual transaction amount. Thats sounds ludicrous to me. It should be obvious that when the $4500 is taken off the MSRP/x amount over invoice price resulting in a final SELLING PRICE, that final price then becomes the figure you would be taxed on. I cannot understand how one could be taxed on a transaction amount that did not actually occur.

Please correct me if I am wrong using the following example.

Vehicle has MSRP of $65,000 and you buy vehicle for $60,000 and tax is 6%, your out of pocket money is $63,600.

You buy MSRP $65k vehicle for $60,000 and get $4500 eco credit resulting in final selling price of $55,500 plus 6% tax so out of pocket is $58,830 ($55,500 +6%/$3,330)

If I understand correctly, your suggesting that in some states the $60,000 "price" is taxed resulting in a $63,600 number and then the $4500 is subtracted from that resulting in $59,100. I find this difficult to believe. If that was the case any retail sales or other sales would be taxed at "list" price which is not the actual transaction price and in this case is $65k. If this is being done, it should be challenged as I don't get it.

In Massachusetts, this does indeed happen but only on purchases of used vehicles, boats, RV's etc. from private parties. It doesn't matter what you paid or what your bill of sale states, when you go to register it, you are taxed on the book value, even though it may be more than the actual selling price.

I don't see how the state can collect taxes on a new vehicle purchase based on an amount that was not the actual transaction price. If that was the case all transactions would be taxed on MSRP and then discounts would be applied after that, I don't think so. I think it's another "profit center" for the dealer that may not be challenged by most.

It's like the $495 dealer documentation fee that was added on to my invoice after the negotiation. This is one of the best ideas ever conceived by the dealers to insure they would pocket this pure profit on every vehicle they move through the store. When the SA presented me with the purchase agreement where that number is preprinted and supposedly non negotiable, I told him it was deal breaker as I refuse to pay someone $500 so they can do the paperwork to sell me something. It was immediately cut in half, by taking the other half off the sales price. It's just part of the game for them and those that don't pay attention, pay the money.

[Diesel Guy]

LubeHead.

What dealer in MA did you purchase from ? I'm working with BMW Gallary in Norwood.

[hugedrive]

Originally Posted by Lubehead

Maybe I don't understand but it seems to me that the answer is clear. The dealer is suggesting that they will tax you on a number that is not the actual transaction amount. Thats sounds ludicrous to me. It should be obvious that when the $4500 is taken off the MSRP/x amount over invoice price resulting in a final SELLING PRICE, that final price then becomes the figure you would be taxed on. I cannot understand how one could be taxed on a transaction amount that did not actually occur.

Please correct me if I am wrong using the following example.

Vehicle has MSRP of $65,000 and you buy vehicle for $60,000 and tax is 6%, your out of pocket money is $63,600.

You buy MSRP $65k vehicle for $60,000 and get $4500 eco credit resulting in final selling price of $55,500 plus 6% tax so out of pocket is $58,830 ($55,500 +6%/$3,330)

If I understand correctly, your suggesting that in some states the $60,000 "price" is taxed resulting in a $63,600 number and then the $4500 is subtracted from that resulting in $59,100. I find this difficult to believe. If that was the case any retail sales or other sales would be taxed at "list" price which is not the actual transaction price and in this case is $65k. If this is being done, it should be challenged as I don't get it.

In Massachusetts, this does indeed happen but only on purchases of used vehicles, boats, RV's etc. from private parties. It doesn't matter what you paid or what your bill of sale states, when you go to register it, you are taxed on the book value, even though it may be more than the actual selling price.

I don't see how the state can collect taxes on a new vehicle purchase based on an amount that was not the actual transaction price. If that was the case all transactions would be taxed on MSRP and then discounts would be applied after that, I don't think so. I think it's another "profit center" for the dealer that may not be challenged by most.

It's like the $495 dealer documentation fee that was added on to my invoice after the negotiation. This is one of the best ideas ever conceived by the dealers to insure they would pocket this pure profit on every vehicle they move through the store. When the SA presented me with the purchase agreement where that number is preprinted and supposedly non negotiable, I told him it was deal breaker as I refuse to pay someone $500 so they can do the paperwork to sell me something. It was immediately cut in half, by taking the other half off the sales price. It's just part of the game for them and those that don't pay attention, pay the money.

That's exactly what I'm thinking. Why would it be credited to the after-tax amount. Doesn't make sense at all.

To other future owners of the X5 35d. How was your eco-credit applied?

Thanks.

[Penguin]

Originally Posted by Lubehead

I don't see how the state can collect taxes on a new vehicle purchase based on an amount that was not the actual transaction price.

Because the State can do whatever it wants, if the State legislature votes it it. It's not about fairness or logic, it is pure politics and budgets. In Illinois, you essentially pay taxes on vehicle rebates, as the state adds back in rebates to compute sales tax.

You want to hear something even more illogical and unfair? Lease a vehicle in Illinois for 3 years and you get to pay the Illinois government the sales tax on the full value of the vehicle, as if you had purchased it outright. So in this case, you didn't even buy the vehicle, and you pay the full sales tax.

The only way to get the right answer, and sometimes this doesn't even work, is to contact your States Tax Department. Often the Motor Vehicle Department will also have a sales tax form with instructions on how to compute the sales tax liability for vehicles purchased out of state. These instructions typically show how to handle the rebate for tax purposes.