New Car? Remember the Tax Credit

Early in the year the government announced the new car tax credit as part of the economic stimulus package. There hasn’t been much attention given to this lately, but if you bought a car this year (or plan to purchase before Dec. 31) don’t short yourself on this break.

The credit allows you to deduct sales and excise taxes and other fees on as much as $49,500 of the purchase price.

Most important—Applies Only to NEW Cars

Only brand-spanking new car purchases qualify. So if it’s used, but new to you, the purchase doesn’t qualify for the credit. But, any car, light truck, motor home, or motorcycle counts

More Details

You must have completed your purchase between February 17, 2009 and December 31, 2009.

The credit is limited to the taxes on vehicles with a purchase price up to $49,500. If the vehicle costs more you can still get credit, but only for the taxes on $49,500 of it.

The income limit is high enough to make it easy for you to qualify. The credit to phase begins at $125,000 for individuals and $250,000 for couples.

You won’t receive this credit at the time of sale. You can claim the credit as on your 2009 taxes. You do not need to itemize credit.

Will Cash for Clunkers Get More Cash?

The White House announced this morning that the Cash for Clunkers program is NOT suspended contrary to rumors that were flying around yesterday.

A spokesperson told ABC news that it is, however, true that the program is running on empty. It was supposed to run through November 1st or until the $1 billion refund money ran out. But sales exceeded government expectations.

The House of Representatives may look into passing some sort of legislation to release more money into the program today, the last day of the session before the August recess begins.

Meanwhile, Cash for Clunkers is sits idling.

Buying a car isn’t always logical-Part 1

About three years ago I found that my Volvo wagon wasn’t cutting it. With three kids, a dog, their friends, camping, and sporting gear, it was just too cramped. So we opted for an affordable 6-seater Ford. It’s not much to look at so the kids and I have stickered-it-up and made it our own. I’m pretty recognizable around town.

Then on a recent trip out to DIA the cruise control started acting screwy and then finally quit. I took it to the dealer for repair last Friday. Later that day we got a call from the sales department. They wanted to buy it back.

Now, I had no intentions of getting rid of my now beloved vehicle. It’s not a great car, but it hasn’t been bad. If a car runs and doesn’t leave me on the side of the road, I’m happy. But, my husband was open to the idea.

I’m still wary of the dealer’s intensions. They said they had a several customers looking for this type of vehicle, but no inventory. I suspect they wanted to upsell us to increase their sales volume. Or maybe it was a combination of both. After talking with them further it was true that they didn’t have inventory. My Freestyle was discontinued a few years ago and they only had one new Flex, the Freestyle replacement, on the lot at a much higher price.

My husband told them we’d be interested if they could give us a Volvo XC90 at not a penny more than we are currently paying for the Ford. They did, sort of.

The dealer had a 2004 XC90 for “just a bit” more. We found the Volvo similar, but bigger than the previous wagon. But I still wasn’t convinced. Anytime something broke on the Volvo the expense was outrageous. This 2004 XC90 wasn’t as well equipped as my Ford—no GPS, no Sirius radio, some other incidentals. And “just a bit” more was $30 more than our current loan per month without warranty. Plus, the loan was over 84 months. We’d end up paying much more in the end.

Then we found that the Volvo was priced $1,000 over book value. They took the price down. I still wasn’t comfortable, so they raised our trade-in-value. So now we are down to just $5 more per month.

Now with the thought of possibly saying goodbye to my Ford we decided to look at other Volvo dealers. We’ve found a few others in the area that have the same year XC90 that we were looking at, but with added features and lower prices.

Complicate all this with the fact that I am irrationally attached to the Ford. (When we bought this my son was playing football, the economy was just beginning to slide, and I felt like I was completely apple-pie American by buying a Ford.) AND, we are preparing to leave next week to drive to Yellowstone dragging a pop-up camper (more horsepower would be nice).

I’m sure there will be more developments throughout the day and week on our vehicle situation.

Cash for Clunkers helps you trade up

The President is likely to sign the War funding appropriates bill, possibly this week. You should care about this because it also includes the “Cash for Clunkers” bill that’s been creating so much interest.

Okay, first a side trip ... Lately it seems quite a few people have asked me how things like guns in state parks and Cash for Clunkers get lumped in with unrelated legislation, like war funding and credit card reform. I don’t want to get political, but here’s the explanation. It’s common practice to include legislation that may not stand on its own in with something stronger. Line-item-veto gave presidential power to reject parts of a Bill during the Clinton administration, but that power was later revoked in 1998 when the Supreme Court ruled that the measure overreached presidential powers. ...OKAY, now let’s get back on course to Cash for Clunkers.

You can finally get rid of that old mini-van!

Cash for Clunkers hopes to remove older, energy inefficient vehicles from US roads by allowing owners to trade them for more fuel efficient vehicles with up to $4,500 incentive. But don’t let your idea of a clunker fool you.

These are the minimum qualifications:
1) The car cannot be older than 1984.
2) It must be in running condition and must have been insured for the past year.
3) Your name must be on the title for at least one year.
4) The car’s MPG must equal 18 or less.

To get cash for your car you must purchase a new car. Used cars, motorcycles and bicycles do not qualify. You could lease a new car, but the minimum lease is 5 years. To qualify for the program you must do business with an authorized dealer between July 1 and November 1, 2009.

You won’t exactly receive cash for your clunker. The program works like a trade-in. You purchase a car from a participating dealer and they take up to $4,500 off the price. The dealer than turns the car over to the government and receives the cash. It’s not clear what happens to the car after that. The intention is to recycle it.

The program is independent from manufacturer buying incentives. In theory, if a car dealer is offering $3,000 off the list price of a car and you qualified for a $4,500 voucher from your trade, then the total reduction off the MSRP would be $7,500.

Cash for Clunker credit ranges from $3,500 to $4,500 dependent on the fuel mileage improvement of your purchase. If you trade in your car for one that has at least 4 mpg better fuel economy than your old one, you'll receive $3,500. The credit goes up to $4,500 if the new car’s combined fuel economy is at least 10 mpg higher.

The requirements are lower for trucks and SUVs: A new small truck or SUV must get at least 2 mpg more than the old one to get a $3,500 credit; 5 mpg for a $4,500 credit. For large light-duty trucks (6,000-8,500 pounds), the old one must be rated 18 mpg or less and the new one must get at least 1 mpg better for the $3,500 credit and 2 mpg better for the $4,500 credit.

Since work trucks (8,500-10,000 pounds) don’t have fuel economy ratings, the legislation goes by model year: The old truck must be from 2002 or before to qualify for a $3,500 credit.

Cash for Clunkers raises so many questions that an FAQ site has been setup by Brian Pasch, CEO of the Pasch Consulting Group. (http://www.cashforclunkersfacts.com/bill-faq) Note that this is not a government website and does include advertising; however, it’s a great FAQ and is updated frequently.

Don't Blindly Trust Carfax

After hurricane Katrina Carfax gained a lot of attention when they saved buyers from purchasing Kat's automotive victims.


That was great press for Carfax, but don't let it trick you into think that Carfax knows everything about every car.

A few years ago I had an accident in my Subaru Outback. A police report and an insurance claim were filed and I had it repaired at a reputable shop. The damage was significant enough and the car was not driveable. Not long after that I decided to sell the car, but first I wanted to see what the Carfax report would look like. So I paid the small fee and found a clean report.

There are any number of reasons why Carfax didn't get word of this car's history.

1. Carfax relies on reports from the DMV, insurance providers and repair shops. If the customer paid cash to fix the damage from the accident, it will not show on the Carfax report.
2. Carfax only shows accidents over 25% of the value of the car at the time of accident.
3. Sometimes Carfax doesn't specify a salvage title. A salvage title is issued for a car if a car was totaled in an accident with the damage being more than 75% of the value of the vehicle.
4. Carfax will not show you if the odometer has been rolled back. While it does show the mileage of the car at title transfers the odometer can be rolled back in between, and you will never know.
5. Frame damage on a vehicle will only show on a car fax report if it has been reported.

Carfax knows it's limitations and includes a disclaimer stating that it's not responsible for omissions, reliability, or accuracy on the report. They only can report what is given to them.

Understand that Carfax is still a worthy tool. Whenever you are buying a used car you should check the Carfax report. If you are buying from a dealer, get them to pay for and furnish the report (it's in there best interest). A clean Carfax report still means that you should have an independent inspection. However, a bad Carfax report is a strong message to steer away from this vehicle.