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I am looking to purchase a vehicle from an individual that is in need of some work. The seller wants an amount for the vehicle that is appropriate for the condition it is in. I will need a loan for double that amount to cover the required work, registration fees and sales tax.
If I get an auto loan, there will be a lien placed on the vehicle for the borrowed amount, correct? Will I be required to pay sales tax to the DMV on the amount that was borrowed? I only want to pay tax on the amount that I agreed to pay for the vehicle, not the total loan. I know I could do this with a personal loan but I would like to know how this works with an auto loan.
First you need to get a loan value on that car from lender. Its unlike they are going to give you a loan higher than the car is valued as it sits. Might have to get a unsecured personal loan to fix the car at higher rate.
I am already approved for the loan for the amount required to purchase and repair the vehicle. My concern is that when I go to the DMV and give them a Bill of Sale that indicates a purchase price below Fair Market Value (due to the required work), that they are going to give me a hard time if they know that a loan for a higher amount was taken out. That is my main question... is there communication between the bank and DMV concerning dollar amounts or is it just whether or not they have a lien on the vehicle?
I don't want to pay hundreds more on sales tax if I am not legally required to do so.
In MD, and before that PA, I have only been asked the amount paid for the car although the lienholder has been listed on the title. I've never been asked the loan amount.
Virginia doesn't ask for the loan amount either....and they will accept any sales price, so long as a below market price is supported by a separate Bill of Sale.
If you have to pay any taxes it would only be on the sale price of the vehicles receipt that you show the DMV. They cannot charge you taxes for the improvements because you'll be paying those taxes on the improvements as you go along getting the vehicle fixed, and that would be for parts not labor.
I am already approved for the loan for the amount required to purchase and repair the vehicle. My concern is that when I go to the DMV and give them a Bill of Sale that indicates a purchase price below Fair Market Value (due to the required work), that they are going to give me a hard time if they know that a loan for a higher amount was taken out. That is my main question... is there communication between the bank and DMV concerning dollar amounts or is it just whether or not they have a lien on the vehicle?
I don't want to pay hundreds more on sales tax if I am not legally required to do so.
That's interesting, because lenders aren't exactly in the biz of loaning money for glorified junk piles. Things are a little tighter these days, ya know?
I imagine you are pre-approved for an amount that happens to be for said vehicle in running condition. I bet the lender will say otherwise if shown what the vehicle looks like currently.
That aside, many locales base your tax on book value if they feel something is fishy. In your case, it seems that it will be salvage value.
That's interesting, because lenders aren't exactly in the biz of loaning money for glorified junk piles. Things are a little tighter these days, ya know?
I imagine you are pre-approved for an amount that happens to be for said vehicle in running condition. I bet the lender will say otherwise if shown what the vehicle looks like currently.
That aside, many locales base your tax on book value if they feel something is fishy. In your case, it seems that it will be salvage value.
Agreed. VA DMV doesn't care about the sales price so much, but when ive called my banks about loans on used cars, NONE of them will finance over NADA black book value. Even when i bought my Jeep new, they told me they'd only go 10% over MSRP.
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