2/12/2009 Note: The car buyer stimulus as outlined in this article has been changed by Congress. The loan interest provision was dropped, however the sales tax still remains deductible as of this update. You can read more here.
Senate Approves Tax Incentives for Car Buyers
With another dismal sales month in the books for just about every auto manufacturer in existence, high-level executives and financial officers are watching their lives flash before their eyes. As a result, incredible incentives can be had just about any place you go, with domestic automakers dominating the deal crunching.
Coming off a disastrous January that saw their sales slip 55 percent from last year, Chrysler opened up the floodgates with employee pricing on their entire lineup. In addition, some 2009 models offer $3500 in rebates, while some 2008 models qualify for $6000 cash back. Chrysler financial says they have plenty of cash to loan customers thanks to their own multi-billion dollar federal loan, and they'll set up four-year payment plans with zero percent financing. Likewise, General Motors currently has a whole list of vehicles that qualify for zero percent financing with various cash back options, and the manufacturer offered additional sales incentives to dealers to help encourage managers to wheel and deal. And these are just the manufacturer programs available; many dealerships are sweetening the deals even further. In some cases total discounts can range up to 40 percent off the sticker price for select cars and trucks.
| In a proposal championed by the National Auto Dealers Association (NADA), the U.S. Senate passed a bill on Feb. 3 that would allow sales tax and loan interest on vehicle purchases to be tax-deductible.
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If you're thinking now would be a good time to buy a new car, you'd be right. But it may get even better very soon.
In a proposal championed by the National Auto Dealers Association (NADA), the U.S. Senate passed a bill on Feb. 3 that would allow sales tax and loan interest on vehicle purchases to be tax-deductible. The measure passed the Senate with a strong majority, and President Obama is said to support the bill. Should it pass, vehicle sales tax would be deductible for the first time since 1986.
"I believe we can help by getting the consumer into the showroom," said Sen. Barbara Mikulski, D-Md. Mikulski has been the leading voice for the provision, which is attached to the new stimulus package currently being debated in Congress.
Should the measure be adopted, persons making less than $125,000 or couples making $250,000 per year will qualify for the deduction. It would apply only to new vehicle sales of $49,500 or less, with delivery dates between Nov. 12 2008 and Dec. 31, 2009. The deduction does not require filers to itemize.
Interest deductions would be applicable for the full term of the loan.
Supporters of the measure say it's the first real step by the government to help bring buyers back into dealerships, while opponents claim the long-term savings of the bill doesn't go far enough to address the immediate concerns of cash-strapped shoppers who would love to buy a car but can't procure financing. Mikulski's office estimates the savings from the tax breaks to be $11 billion dollars over a 10-year period. NADA estimates consumers would save approximately $1500 on a $25,000 vehicle.
Combined with aggressive pricing and manufacturer cash back incentives, offering tax deductions on new vehicles could bring total vehicle discounts to 50 percent off the manufacturer's suggested retail price. If you are even remotely in a position to buy a new car, now is definitely the time.
By: Christopher Smith, Autotropolis
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