Won't you always lose money with tax, title, tags and fees?

tonspiketonspike Member Posts: 4
edited October 2017 in General
Please excuse my ignorance, but I'm new to car buying.

Let's say I purchase a $45,000 car and the tax, title, tags and fees come out to $5000 for a total of $50,000 paid out of pocket.

Let's say I sell this vehicle one year later, for the same $45,000 I paid for the car alone. I assume I in no way receive any of my $5,000 back from the tax, title, tags and fees--so I essentially paid $5,000 to drive the vehicle one year?

Is there something I'm missing? Thanks for your insight.

Comments

  • PF_FlyerPF_Flyer Pennsylvania Furnace, PAMember Posts: 9,403
    I'd start with... car are not investments, unless we're talking about something "collectible". And even if you sell it as a private party and don't trade it in, you're not going to get anywhere near what you paid for it.

    My point is, it's not money "lost" any more than money you spend on anything (couch, bed, lawnmower, etc) is lost.

    Go to the Research tab at the top of the page and look at prices on Used Cars from last year to get an idea of how much cars depreciate
  • Mr_ShiftrightMr_Shiftright Sonoma, CaliforniaMember Posts: 64,482
    edited October 2017
    tonspike said:

    Please excuse my ignorance, but I'm new to car buying.

    Let's say I purchase a $45,000 car and the tax, title, tags and fees come out to $5000 for a total of $50,000 paid out of pocket.

    Let's say I sell this vehicle one year later, for the same $45,000 I paid for the car alone. I assume I in no way receive any of my $5,000 back from the tax, title, tags and fees--so I essentially paid $5,000 to drive the vehicle one year?

    Is there something I'm missing? Thanks for your insight.

    You'll almost always lose money due to depreciation. In some cases it is possible to recover taxes, such as if your car is totaled by the insurance company--but of course they'll pay you Actual Cash Value, not what you paid at the dealer.

    As PF said, cars are neither an appreciating, or a very liquid, asset, except in very rare cases.
  • kyfdxkyfdx Moderator Posts: 187,579
    tonspike said:

    Please excuse my ignorance, but I'm new to car buying.

    Let's say I purchase a $45,000 car and the tax, title, tags and fees come out to $5000 for a total of $50,000 paid out of pocket.

    Let's say I sell this vehicle one year later, for the same $45,000 I paid for the car alone. I assume I in no way receive any of my $5,000 back from the tax, title, tags and fees--so I essentially paid $5,000 to drive the vehicle one year?

    Is there something I'm missing? Thanks for your insight.

    Some states give you a tax credit for the trade-in value of a car, if you trade it in on another one. So, the answer is, it depends.

    But yes, if you pay 10% sales tax on a vehicle, then sell the vehicle after one year, not only will you lose money on the loss in value, but you'll also have paid the full sales tax to drive just one year.

    That's why people don't do that.

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  • PF_FlyerPF_Flyer Pennsylvania Furnace, PAMember Posts: 9,403
    edited October 2017
    My mental trick is that when I pick up my new car, its worth, to me, is ONE CAR. And when I get around to trading/selling, it has not changed value. Still ONE CAR. The rest is just accounting :)
  • tonspiketonspike Member Posts: 4
    Thanks guys. I'm well aware of car depreciation, I was just entertaining the idea in a "perfect world" (no depreciation) scenario to further illustrate the point.

    I see people writing about how they drove X car for X amount of time once it had hit its depreciation floor (this is obviously limited to select vehicles, such as exotics and/or classics) and did not lose any money after selling it for the same price they had purchased it. I guess that's stretched truth, though, as they did in fact lose in tax, title, tags and fees--that's why I was curious if I was missing something.

    Puts things in perspective. Even buying used can incur you decent losses without even factoring in depreciation.
  • PF_FlyerPF_Flyer Pennsylvania Furnace, PAMember Posts: 9,403
    I guess to put my view simply... it's not a loss in a loss/gain sense. More a "cost"
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