How to Save on Sales Tax When Buying a New Car

The last thing anyone wants to do is overpay in taxes. That's why it's important to know how to save on sales tax, especially if you're making an expensive purchase.

For example, do you know how much to expect to spend on sales tax when buying a new car, truck, or SUV? In Ohio, it's upwards of 5.75% of the purchase price. It may not sound like much, but nearly six percent of a big-ticket item can be hundreds, even thousands of dollars.

The average sales price of a new car in the U.S. is $45,000¹. Ohio sales tax on that amount would be $2,587.50! That's not pocket change for the average American.

But there's a way to save on sales tax when buying a new car, and it's simple. Trade in your old one.

Trading in your current car saves on tax

In addition to taking advantage of great sales incentives with Progressive, trading in your existing vehicle is a fantastic way to reduce the amount of sales tax you owe in Ohio. Here's how it works.

Say you purchase a new vehicle for $50,000. Your sales tax on that amount would be 5.75%, or $2,875. But if you have a car, truck, or SUV to trade in, you only owe sales tax on the difference. So, suppose your trade-in is worth $17,000 - you'll only have to pay sales tax on $33,000 instead, because that's the difference between the sales price and the trade-in value. Sales tax on $33,000 would be $1,897.50, saving you nearly a thousand dollars ($977.50, to be exact).

It's important to note that this tax savings does not apply if you sell your vehicle via private party. When you sell your current vehicle to a private buyer, instead of trading it in when you buy your new car, you will not be able to take advantage of the reduced sales tax on your new vehicle. In that instance, the private sale is a separate transaction and does not impact the final purchase price and applicable taxes of the new car.

That's why it's important to trade in your existing vehicle at the time of purchase if you'd like to reduce your sales tax liability.

Not everyone realizes that when considering a private sale; they're more focused on simply selling their existing vehicle. But you could be spending hundreds or thousands of dollars in excess state sales taxes by doing it that way.

The next time you're shopping for a new or used vehicle, trade it in with Progressive. Not only will you reduce your sales tax liability on the new vehicle, but we always have outstanding offers, too. You can get a guaranteed $5,000 for your trade when you purchase a certified pre-owned vehicle from Progressive Chrysler Dodge Jeep Ram - that's instant savings.

Stop down to our Massillon, Ohio, showroom to check out our inventory of new and used Chrysler, Dodge, Jeep, and Ram cars, trucks, and SUVs and see how much you can save when you shop with us. Contact a sales specialist to learn more or make an appointment.

¹https://www.cnet.com/roadshow/news/average-new-car-costs-price-increase