Saturday, 2 October 2010

Sales tax when buying a car

In NI (and the UK, and the Republic of Ireland), when you buy a car second hand, you don't have to pay any taxes. So there's really nothing to stop you buying a car and selling it on: there is very little government-imposed *friction* to buying and selling cars. This is a good system.

Admittedly when you buy a *new* car, the price *includes* lots of taxes. But at least the price you see is the price you'll pay. More or less. (Assuming you don't get suckered into buying all sorts of crap by the sales fella...)

Here in California, the price you see when you buy a car is not the price you'll pay. You'll pay *about* ten per cent extra in taxes/fees. There are a few different components, but by far the biggest is the registration tax. I believe this actually goes to the county you live in rather than to the state. Which is something, I guess. The tax goes by different names in different counties, and may vary slightly in amount, but it's going to be pretty darn close to 10%.

But the thing I dislike about the California way is that they also charge this fee on second-hand car sales. When we bought our car (for $7200 or $7300, I forget which), I then had to physically go to the DMV (the topic of a future rant, possibly many) and pay them either $808 or $708 dollars. I remember that the car cost $8008 in total, even though the seller only got $7200.

(This nonsense explains why people tend to hang onto their cars more here in CA, why they have a different relationship to their cars to what I'm used to.)

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