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Cash For Clunkers?


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Got this in an email, not sure if its true or not?


If you traded in a clunker worth $3500, you got $4500 off for an apparent

"savings" of $1000. You could have gotten $3,500 if you had just traded the car

in. So you really are $1,000 ahead (depending on your clunker's value) at this

point. Not too bad...


However, you WILL have to pay taxes on the $4500 come April 15th(something that

no auto dealer will tell you). If you are in the 30% tax bracket, you will pay

$1350 on that $4500.


So, rather than save $1000, you will actually pay an extra $350. To the feds. In

addition, you traded in a car that was most likely paid for. Now you have 4 or 5

years of payments on a car that you did not need, trading in a "clunker" That

was costing you less to run than the payments that you will now be making. Even

if you save $1,000. Dollars a year in gas due to better mileage, you're still

gonna be in the red for five years....hello?


But wait, it gets even better: you also got ripped off by the dealer. For

example, the month before the "cash for clunkers" program started, Every dealer

here in LA was selling the Ford Focus with all the goodies including A/C, auto

transmission, power windows, etc for $12,500. Because competition was stiff due

To poor sales from the stalled economy.


When "cash for clunkers" came along, they stopped discounting them and instead

sold them At the list price of $15,500. So, you paid $3000 more than you would

have the month before. Honda, Toyota , and Kia played the same list price game

that Ford and Chevy did. Now let's do the math...


You traded in a car worth: $3500

You got a discount of: $4500


Net so far +$1000

But you have to pay: $1350 in taxes on the $4500


Net so far: -$350 (that's minus...in the red)

And you paid: $3000 more than the car was selling for the month before


Net Loss: -$3350


We could also add in the additional taxes (sales tax, state tax, dealer prep,

etc.) On the extra $3000 that you paid for the car, along with the Five years of

interest on the car loan; But let's just stop here while you kick yourself.

Suffice it to say that those costs will be much higher than any savings you get

from "better mileage".


So who actually made out on the deal? FEDZILLA collected taxes on the car along

with taxes on the $4500 they "gave" you. The car dealers made an extra $3000 or

more on every car they sold along with the kickbacks from the manufacturers and

the loan companies. Manufacturers got to dump lots of cars they could not give

away the month before. Lots of good or repairable used cars got taken off the

market, crushed and sold as scrap metal to (ready for this?) CHINA! (Look it

up...) And the poor consumer got saddled with even more debt that they cannot



FEDZILLA'S merry men (who promised that people making less than $250,000. Would

pay "not one red cent more in taxes") Will make millions in new tax revenues

after convincing Joe Consumer that he was getting $4500 In "free" money from the

"government" In fact, Joe was giving away his $3500 car and paying an additional

$3350 for the privilege. Chicago politics gone global...with an agenda.


If you find errors in this math, please let me know...being a simple guy, I'm

always willing to learn new things; and if you took "advantage" of the Clunkers

deal, I have some swamp land down in Florida that's for sale...

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The incentives aren't taxable at the federal level, but depending on the excise and road use taxes in your respective state, you may have to pay tax on the value of the incentive. For instance, in states where you pay an excise tax on car purchases, some states will tax you on the purchase price of the car (including the rebate), while some will only tax you on the purchase price of the car, net of the rebate. So, if your state has a 4% excise tax on vehicle purchases, some will charge that 4% on the value of the $4,500 rebate + $20,000 car price ($24,500-4,500) or $180 + 800 in excise taxes, while other states will net the rebate, and only charge the $800 excise tax.


The good news most of this seems to be sales and excise taxes, all of which should be included in the final price of the car. So I don't see any of this coming back to bite us on our state income tax return.


BUT, the good news is, if you fall victim to paying taxes on the rebate, you can recoup some of that on your federal tax return if you itemize your deductions on the Sch A. You can deduct either state and local sales taxes, or state and local income taxes, and at least you'll be able to get some of that money back.

Edited by LoArmistead

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The tax percentages are wrong in that (and you can deduct a portion on your returns).


I'm just pissed I have to pay for the program...


There are a lot of things I am pissed about that we have to pay for, that is a new topic I guess. I dont even know why we need these idiots up there in washington to spend our money, and make new laws to get our money while they kick back on there yachts smoking cigars and drinking and thinking about ways to get more money out the american people, and fill there pockets. Need to get rid of all of them and go back to the old west days...

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We are paying for it thats what is wrong with that...

Oh, I just meant the yachts, smoking cigars, and drinking, :D


I don't want to pay for politicians to do it. :lol:

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