Legislation passed a few weeks ago in the state of Georgia that may make you consider whether it is a good time to buy a car this year in 2012 or wait until after March 1st, 2013. Among its many components, HB 386 eliminates both the sales tax and the “birthday tax“ (the annual ad valorem vehicle property tax), on cars, trucks and vans. Replacing these taxes is a one-time “title fee” on new or used vehicles equal to 6.5 percent of the car’s value. All vehicles purchased after March 1, 2013 will use the new title fee system. In Fulton County, for example, the current sales tax rate is 6%; so, a vehicle purchased after March 1, 2013 will pay a one-time “title fee” of 6.5% instead and NEVER pay the yearly ad valorem tax for as long as you own your car, truck, or van. Eventually that Title tax will climb to 7%.
For most, waiting to purchase a new car will likely be the best route to go if you can hold out until next year especially if you buy from a dealer. If you are thinking about purchasing the car from another individual, you may want to go ahead and do that here in 2012. Here’s why . . . Car deal have long complained that people who buy cars from other individuals in Georgia don’t pay sales taxes on the purchase. Now, anyone buying a car would have to pay the title fees. This would allow the state to capture fees from individuals who sell their cars to other individuals. The only work around in the proposal is a transfer between immediate family members which would be subject to one-half of one percent.
So, let’s look at an example:
Let’s say you are looking to purchase a 2012 Ford Fusion Hybrid. Now, there are various ranges and prices for this vehicle, but let’s use an average price of $25,000.
Underneath today’s environment if you bought the car in Fulton County, you would have to pay the 7% sales taxes which would represent an additional $1,750. You’d also be responsible for the ‘birthday ad valorem tax’ for as long as you chose to hold the car which as you can see by the chart below would represent almost $400 in the first year, but could represent thousands of dollars over the course of 5 to 10 years if that is how long you chose to keep the automobile.
Vehicle Ad Valorem Assessment
|Type of Vehicle:||Automobiles|
|Select a County:||FULTON|
|Select a District:||ALPHARETTA|
|Ad Valorem Tax:||392.70|
Underneath the new title tax, you would only pay the 6.5% title fee if you bought the car after March 1st, 2013 which would represent an immediate short term savings while eliminating the birthday tax over the long haul. Since the sales tax varies from county to county, most people will benefit by waiting to by a car until after March 1st, 2013 if they plan to hold the car at least two to three years. The only exception may be if you purchase from another individual since the sales tax does not currently apply.
You can certainly read more about this in House Bill 386, but this is certainly a consideration for a smart money move over the next twelve months especially if you are in the market for getting a new car.
Visit to www.oxygenfinancial.net to request a free consultation with the leading financial experts for people in their 20’s, 30’s, and 40’s in the country.
Ted Jenkin, CFP®, AAMS®, AWMA®, CRPC®, CMFC®, CRPS®
Co-CEO and Founder of oXYGen Financial, Inc - The Leaders in Gen X & Y Financial Advice
TED JENKIN IS SECURITIES LICENSED THROUGH INVESTACORP, INC. A REGISTERED BROKER/DEALER MEMBER FINRA, SIPC.ADVISORY SERVICES OFFERED THROUGH INVESTACORP ADVISORY SERVICES, INC. A SEC REGISTERED INVESTMENT ADVISORY FIRM. Linked sites are strictly provided as a courtesy. Investacorp, Inc., and its affiliates, do not guarantee, approve nor endorse the information or products available at these sites nor do links indicate any association with or endorsement of the linked sites by Investacorp, Inc. and its affiliates.