Sometimes buying a car from an out of state car dealer isn’t worth the potential savings.
Here’s a few things you should know before getting started:
- Unless the dealer location is close to Massachusetts, chances are the dealer is not registered with the Massachusetts Department of Revenue (Mass DOR).
- This is important because the Mass DOR will not give you credit for the sales tax on the car you’re trading in.
- This means you will pay sales tax on the purchase price of the new car and not the difference between the new car and your trade. This could results in hundreds or even thousands of dollars.
**An example of this would be if you bought a new car for 40k and the dealer gave you 30k for your trade in:
- If the dealer is registered with the Mass DOR you would pay sales tax on the 10k difference which is $625.
- If the dealer isn’t registered with the Mass DOR you would pay sales tax on the full purchase price of 40k (no credit for the trade) which means the sales tax you would pay is $2500. There goes the potential savings as your out of pocket cost just went up $1,875.
Over the years we have run into this situation many times. Some dealers will register with the Mass DOR and have told us that the process for the dealer to register is very easy.
We once had a client buy a motor-home in South Carolina and the trade in was worth 70k. He called the dealer and tried to get them to register with the Mass DOR but the dealer refused to do it and it cost him an extra $4,375!
Bottom line is to check with the out of state dealer BEFORE you buy a car from them!