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Anyone with an 06 thinkin of trading for an 07?

Discussion in 'Gen 2 Prius Main Forum' started by 4chi, Feb 22, 2007.

  1. 4chi

    4chi New Member

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    I got my 06 in Sept. I love it.

    And I live in Colorado, which gives a $3250 state tax credit, no ATM/TMT phases outs, just a straight credit.

    So I'm thinking, hmm, should I go ahead and trade in my 06 for an 07 this year?

    Even if I get $0 for a fed tax credit, I'll still get the Colorado credit.

    If I can get the 07 within $3250 of what I paid for 06, isn't this ia no-brainer?

    Has anyone done this or run the figures on doing it?

    What am I missing?

    EDIT:
    Edmunds tells me trade in value of my 06 package 6 is $22,353.
    Toyota tells me that MSRP on a comparable 07 (not touring) is $25,975. Add on about $400 D&H, and that totals $26,400.
    So a difference of about $4000.
    With the Colorado tax credit (which is actually $3013 for the 07 Prius) that difference becomes $1000. $1000 out of pocket for a brand new car. And that is if I pay MSRP, which it sounds like people aren't doing anymore.

    EDIT No. 2:
    I see in another post that someone just bought an 07 for $3000 under MSRP at the same Denver dealer where I purchased mine (Mtn States). If I could really get that price, then I'd be MAKING money on a trade in?!
    Trade in: $22,353
    07 cost: $23,400 ($3000 off MSRP)
    CO tax credit: $3013
    Net cost to me: negative $1933
    Even if the trade in only valued at $21000, I would still be positive by about $600.

    This seems way too good to be true.
     
  2. gjertsen

    gjertsen Junior Member

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    <div class='quotetop'>QUOTE(4chi @ Feb 22 2007, 12:08 PM) [snapback]394572[/snapback]</div>
    Possibly nothing; and it is wonderful that you have a state and federal incentive to buy a Prius! However, I would consult a tax advisor on this, because I remember reading that there are probably going to be recapture rules for this credit (at least, the federal one) for people who sell their hybrids early, I just haven't seen it spelled out anywhere on www.irs.gov. Probably a Regulation that will come pretty soon, if it hasn't already.

    You might be interested in a forum topic titled: "Hybrid Tax Credit Recapture Rules"
     
  3. jesart

    jesart Junior Member

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    <div class='quotetop'>QUOTE(gjertsen @ Feb 22 2007, 01:49 PM) [snapback]394672[/snapback]</div>

    There is no recapture of the tax deduction or the tax credit for normal individuals. (Nothing official yet for individuals)

    The recapture is only applied to:

    Nonqualifying property.
    This is property used in the following ways.

    Predominantly outside the United States.

    Predominantly to furnish lodging or in connection with the furnishing of lodging.

    By certain tax-exempt organizations.

    By governmental units or foreign persons or entities.



    Here's the official wording from the IRS:



    Recapture of the Deductions
    If the property ceases to qualify, you may have to recapture the deduction. You recapture the deduction by including it, or part of it, in your income.

    You must recapture the deduction for clean-fuel vehicle property if the property ceases to qualify within 3 years after the date you placed it in service. The property will cease to qualify if it is changed in any of the following ways.

    It is modified so that it can no longer be propelled by a clean-burning fuel.

    It ceases to be a qualified clean-fuel vehicle property (for example, by failing to meet emissions standards).

    It becomes nonqualifying property, defined earlier. (SEE BELOW)

    Sales or other dispositions. If you sell or otherwise dispose of the vehicle within 3 years after the date you placed it in service and know or have reason to know that it will be changed in any of the ways described above, you are subject to the recapture rules. In other dispositions (including a disposition by reason of an accident or other casualty), the recapture rules do not apply.


    Recapture of the Credit
    The electric vehicle credit is subject to recapture if, within 3 years after the date you place the vehicle in service, it ceases to qualify for the electric vehicle credit. You recapture the credit by adding it, or part of it, to your income tax for the year in which the recapture event occurs.

    The vehicle will cease to qualify if it is changed in either of the following ways.

    It is modified so that it is no longer primarily powered by electricity.

    It becomes nonqualifying property, defined earlier. (SEE BELOW)


    Sales or other dispositions. If you sell or otherwise dispose of the vehicle within 3 years after the date you placed it in service and know or have reason to know that it will be changed in either of the ways described above, you are subject to the recapture rules. In other dispositions (including a disposition by reason of an accident or other casualty), the recapture rules do not apply.


    Nonqualifying property.
    This is property used in the following ways.

    Predominantly outside the United States.

    Predominantly to furnish lodging or in connection with the furnishing of lodging.

    By certain tax-exempt organizations.

    By governmental units or foreign persons or entities.

    Here's a previous post: http://priuschat.com/index.php?act=ST&f=19&t=29029
     
  4. 4chi

    4chi New Member

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    Good to know.

    So unless you know that you are selling it to someone who will rip out the battery or make it non-qualifying, there is no recapture. In sum, trading it in to a dealer should not cause any concern about recapture. I read that actual Colorado statute on the hybrid credit and there is nothing in there about recapture.

    The only thing I can think that I'm missing here is that trade in values must be lower in Colorado.

    Edmunds says if I traded in my 06 to the dealer for $22,353, the dealer would retail it for $25,936. No one would pay that when you could get a brand new 07, similarly configured, for $26,400 (MSRP), especially when you get $0 Colorado tax credit when buying a used one? Trade in value listed on Edmunds for my 06 must be way out of whack for what dealers will actually give you in Colorado.

    That said, I see dealers listing used 06's for prices in lines with Edmunds valuation.

    I put in a call to my dealer, I'll let you know what I find out.
     
  5. paprius4030

    paprius4030 My first Prius

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    I've tried trading in my 05 and haven't gotten any offers close to kelly's blue book value and I think Edmunds is even more generous than Kellys????The dealers are moaning because the new ones aren't selling and they have to discount the new ones that makes the used ones worth less.
     
  6. 4chi

    4chi New Member

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    Good point.

    Kelly tells me trade in would be $21,900 (I've only got 2000 miles).

    So that still seems to give me enough leeway to come out making money on this deal.
     
  7. kokid

    kokid Junior Member

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    <div class='quotetop'>QUOTE(4chi @ Feb 22 2007, 12:08 PM) [snapback]394572[/snapback]</div>
    You're not counting the fact that your giving up your $3K credit in the exchange. The differences between the 06 and 07 are small -- I'd keep the 06 and the $3,013. If exchanging for the 07 is worth $3k to you, then do it.
     
  8. 4chi

    4chi New Member

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    <div class='quotetop'>QUOTE(kokid @ Feb 22 2007, 05:03 PM) [snapback]394782[/snapback]</div>
    But why do you say I'm giving up my $3k credit in the exchange? I'm not. I will be claiming that $3k Colorado credit on my 06 Colorado income taxes that I plan to file this weekend. I am entitled to claim that becuase I bought an 06 in 06.

    And then I'll claim another $3k credit in 07 if I did this trade in.
     
  9. gjertsen

    gjertsen Junior Member

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    <div class='quotetop'>QUOTE(4chi @ Feb 22 2007, 03:30 PM) [snapback]394748[/snapback]</div>
    That's not how I read the earlier post. It sounds like there is recapture to consider in the case of a sale within 3 years except in the case the disposition had to do with an accident, etc.
     
  10. DaveinOlyWA

    DaveinOlyWA 3rd Time was Solariffic!!

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    i find it hard to believe that colorado will let you buy and sell cars unendlessly at $3500 a pop.
     
  11. Ari

    Ari New Member

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    Isn't anyone paying _sales tax_ when buying a car? At t least here in CA you pay 2-3k in taxes for a Prius and I'd count that as a loss when considering a trade in.
     
  12. jesart

    jesart Junior Member

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    Nope, you shouldn't have to worry about the recapture if you trade-in your Hybrid vehicle if you’re a normal individual. What is normal??

    I think everyone got the misconception from a previous post, which linked to another website that talked about the Recapture. I can't seem to find this website but the author mentioned that recapture was for anyone trying to sell or trade their hybrid within a 3yr period. I'm sorry, but I tend to believe what's on the official IRS website than a third party tax advisor site.

    That doesn't mean the IRS can't change their Recapture policy. You should be able to claim your Hybrid Tax credit for the 2006 and 2007 according to their qualifying rules. Then again, you might get the AMT tax.


    Does anyone else have an opinion on this?
     
  13. 4chi

    4chi New Member

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    <div class='quotetop'>QUOTE(Ari @ Feb 22 2007, 05:20 PM) [snapback]394802[/snapback]</div>
    Not in Colorado. If you trade it in to the dealer, you only pay the sales tax on the difference.

    Example:

    Trade in: $21,000.

    New car: $24,000.

    Sales tax computed on $3000.

    In sum, yes, I should consider that difference. Given Denver's almost 8% sales tax, it would be about $240 tax on a $3000 difference.
     
  14. slvr_phoenix

    slvr_phoenix Tinker Gnome

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    <div class='quotetop'>QUOTE(paprius4030 @ Feb 22 2007, 02:36 PM) [snapback]394757[/snapback]</div>
    I know that when I bought my '06 back in September that the dealership's used car branch was selling a basic '04 with something like 30K miles on it for more than my shiny brand new '06 because used cars are available ASAP where as ordering a new Prius from the factory you have to wait, and wait, and wait. Patience is a virtue. Instant gratification costs. :lol:

    Luckily I got in on the scant remains that hadn't been claimed yet of a large order and only had to wait a month for mine. But I didn't get to choose color or options because of that or else I'd have had to wait until the next shipment which would have been seven months. I'm not that patient. :eek:

    I'm hearing there's a glut of Prii in some places, so YMMV, but so far there's still a shortage around here. I know if I wanted to I could sell Silver Phoenix (my plain Jane silver '06) for more than it'd cost me to buy a shiny new '07. The hassle of re-waiting combined with my love for my car isn't worth the profit though, even if I could use it to upgrade to a few handy options. I'd rather just mod the car I love. :wub: Gives me a reason to play too. ;) I luv toying with new shiny! Now if only I had money...
     
  15. 4chi

    4chi New Member

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    <div class='quotetop'>QUOTE(DaveinOlyWA @ Feb 22 2007, 05:12 PM) [snapback]394794[/snapback]</div>
    Yeah, that is the too good to be true aspect.

    But I read the actual law...no limits in there. (39-22-516, C.R.S., if you are interested)
     
  16. JSH

    JSH Senior Member

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    <div class='quotetop'>QUOTE(4chi @ Feb 22 2007, 03:51 PM) [snapback]394774[/snapback]</div>
    Why would you even go through the hassle if you only have 2000 miles?
     
  17. 4chi

    4chi New Member

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    <div class='quotetop'>QUOTE(jhinton @ Feb 22 2007, 06:00 PM) [snapback]394830[/snapback]</div>
    Money. Plus I'd really like a gray one instead of red.
     
  18. JimN

    JimN Let the games begin!

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    <div class='quotetop'>QUOTE(4chi @ Feb 22 2007, 05:23 PM) [snapback]394847[/snapback]</div>
    In NJ the value of a trade in is deducted before sales tax is calculated on the purchase. As far as I know the IRS hasn't written a recapture clause for the hybrid credit and you may qualify for the 2007 Federal credit. So if indeed the numbers work for you now may be the time to trade up. At the very least the car will be in warranty for another year.
     
  19. AnOldHouse

    AnOldHouse Member

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    <div class='quotetop'>QUOTE(Ari @ Feb 22 2007, 04:20 PM) [snapback]394802[/snapback]</div>
    Not in Connecticut. Hybrids that get 40 MPG or better are sales tax free since October 2004 and that will run until 2009.