This is something I never thought to ask and then a friend brought up the question .......... and now he has me thinking big time.

Correct me if I'm wrong.

Cash-back Incentives & cash rebates come off the bottom line. After all costs are calculated including tax, tags etc....

To clarify and more specific, in the final contract, once all costs\fees are totaled and taxed, then only at that point should Cash incentives & Cash rebates be calculated to bring you to the bottom-line total.

Thanks for your help

 

No, it's not income. Just recieving money back that was already yours.

 

Thanks Razz1 ....... you're the first to say anything conclusively. Everyone else I asked, don't have a clue.

 

I don't think he's talking about income tax, he means sales tax. Pretty sure you do have to pay sales tax on the pre-rebate total.

 

Map's right. If the MSRP is 34,000 and your negotiated price is 30,000, and rebates are an additional 3000, then sales tax is calculated on the 30,000; let's say the sales tax rate where you live is 7% making the "out the door" price 32,100, then you take off the 3000 from that making your net out the door 29,100. So what really happened was that you ended up not getting the full 3 grand cash back because you were in effect, taxed on 7% of it (or $210). Kind of sucks.

 

Yeah ...... the facts of life RX26b & map.

That was my whole argument, if I'm getting a cash rebate for 3000 then it should be just that. Don't get me all excited about a cash incentive and then tax it so that its value is diminished.

 

That will depend on the state. See the chart at the end of this article from Edmunds.

http://www.edmunds.com/advice/buying...4/article.html

 

AWESOME!! Hyperborea .......... THANKS

Are Incentives Taxed?
If there is Y in this column it means that sales tax is calculated before any customer cash rebates are subtracted.

This was what I was looking for, the dealer deducted the rebate from the total and then calculated the tax ..... which is incorrect according to the article.

car cost + sales tax - rebate = total to be financed etc ...

I'm certain that many don't know this valuble information.

 

The dealer will always try to act like the car is cheaper by deducting the rebate, or by using incentives. Negotiate the cost of the car first. The rebate comes from the manufacturer. No money out of the dealers pockets. Additionally, even if you do research on cars.com or another website and find out their invoice price- dealers often use the $1 over invoice gimmick-remember this; if the dealership has a large volume of cars they get discounts off invoice for buying and selling a large inventory. That means they get the car sometimes even below normal invoice. Always apply the rebate/incentives. They will save you a huge amount of money over the course of a 5 year financing. 2008s are coming out, so if you take the rebate- more like bait- on an 07 make sure that you do some research on what that car costs as an 07 used, otherwise you'll take the rebate and in a month you'll realize you're several thousands upside down. This was just my two cents, peace.