

11292013, 07:06 PM

Member


Join Date: Sep 2013
Location: Michigan
Posts: 101
Thanks: 0
Thanked 1 Time in 1 Post
Rep Power: 1134


Pricing hijinx?
Ok, got a question for those in the know. Went to test drive a Durango RT today (awesome btw), but afterward, the numbers didn't come out to what i expected. I'm in Michigan. They're currently offering $2500 in incentives at this dealer. We also have employee pricing.
Invoice price came to $44,007 as expected. However, considering employee pricing, sales tax, and the incentives noted above, the car came to (estimated) $45,000. That didn't seem right to me so he walked me through the math.
EP + $2500 rebate
then add 6% sales tax to that number
then subtract $2500 rebate.
That didn't seem right either. My understanding is the math should look something like this:
EP price  $2500 rebate
then add 6% sales tax.
At the very least, should be
EP price + 6% tax, then subtract rebates.
Anyone know which one is correct? The way he did it just didn't seem correct (add the rebate, tax that amount, then subtract rebate). That means you're getting taxed on the rebate/incentive. The difference is substantial (about $2000) so it's not exactly chump change.
That math, and the fact that he couldn't show me the EP until after placing the order, made me uncomfortable so i walked.
__________________

11292013, 09:28 PM

Member


Join Date: Aug 2013
Posts: 315
Thanks: 9
Thanked 43 Times in 29 Posts
Rep Power: 1388


I got an R/T with FFP pricing. Cars sticker was around $49,300 and I ended up getting it to about 45k+ tax.
__________________
__________________
______________________________
2014 Black R/T  5.7L HEMI V8 AWD
Technology Group, Trailer Tow Group IV, Premium Nappa Leather Group, SecondRow Fold / Tumble Captain Chairs, Power Sunroof, Uconnect(R) 8.4 AN, 20Inch X 8Inch Polished / Painted Wheels

11292013, 10:59 PM


Moparpalooza Founder
My Jeep: 2014 5.7L SRT8


Join Date: Mar 2010
Location: DC via Detroit
Posts: 1,041
Thanks: 91
Thanked 20 Times in 16 Posts
Rep Power: 349618


Rebates are taxed
__________________
Current
2014 Black Durango R/T
Past
2010 Modern Blue Jeep SRT8
2006 Dodge Charger SRT8

11302013, 03:28 AM

Premium Member


Join Date: Sep 2013
Posts: 700
Thanks: 4
Thanked 99 Times in 77 Posts
Rep Power: 7267


Rebates are taxable. The dealer math is correct in the end but I can see why it would be confusing. The real formula is:
EP + .06 x ( EP + 2500 ) = price
The .06 x ( EP + 2500 ) gives you the 6% sales tax on the EP and the 2500 rebate. To show you it works out the same, let's use a nice round number for the EP...say, 10000. Using this formula, you get:
10000 + .06 x ( 1000 + 2500 ) = 10750.
Now let's do it the way the dealer described it:
10000 + 2500 = 12500
Adding 6% of 12500 (which is 750) gives 13250
Subtracting 2500 gives 10750
Plug in your numbers and you'll see it comes out the same and is the correct price.

11302013, 06:03 AM

Member


Join Date: Sep 2013
Location: Michigan
Posts: 101
Thanks: 0
Thanked 1 Time in 1 Post
Rep Power: 1134


Quote:
Originally Posted by Peter_K
Rebates are taxable. The dealer math is correct in the end but I can see why it would be confusing. The real formula is:
EP + .06 x ( EP + 2500 ) = price
The .06 x ( EP + 2500 ) gives you the 6% sales tax on the EP and the 2500 rebate. To show you it works out the same, let's use a nice round number for the EP...say, 10000. Using this formula, you get:
10000 + .06 x ( 1000 + 2500 ) = 10750.
Now let's do it the way the dealer described it:
10000 + 2500 = 12500
Adding 6% of 12500 (which is 750) gives 13250
Subtracting 2500 gives 10750
Plug in your numbers and you'll see it comes out the same and is the correct price.

If that's true though, then it's best to say no to the rebate then.
example: $10,000 + 6% = $10,600
or with rebate: $12,500 + 6%  $2500 = $10,750
So it makes no sense to use the rebate. My understanding is that rebates are like down payments and the taxable amount is the price prerebate only to take the rebate off of that number.
This is what the state says. Granted it's old, but perhaps still current.
https://www.google.com/url?sa=t&sour...JXQiUWjOnpwLTQ

11302013, 09:18 AM

Member


Join Date: Mar 2013
Posts: 30
Thanks: 0
Thanked 1 Time in 1 Post
Rep Power: 1269


Re: Pricing hijinx?
I just did this with a dealer yesterday. I am in Chicago so I don't know if it is different, but it goes price+ taxincentive. That way uncle Sam gets a smidge more.

11302013, 11:00 AM

Premium Member


Join Date: Sep 2013
Posts: 700
Thanks: 4
Thanked 99 Times in 77 Posts
Rep Power: 7267


Actually my math is off...never do math at 3:30am
The dealer is actually incorrect. The first equation I showed should have another 2500 subtracted off of it. It should be:
EP + .06 x ( EP + 2500 )  2500 = price
And that's not the same as the dealer's math. As someone pointed out, the dealers math effectively makes you get no rebate but pay more tax.

11302013, 12:03 PM


Moparpalooza Founder
My Jeep: 2014 5.7L SRT8


Join Date: Mar 2010
Location: DC via Detroit
Posts: 1,041
Thanks: 91
Thanked 20 Times in 16 Posts
Rep Power: 349618


Also depends on the state sales tax on new cars for the state you live in.
__________________
Current
2014 Black Durango R/T
Past
2010 Modern Blue Jeep SRT8
2006 Dodge Charger SRT8

11302013, 12:18 PM


Premium Member
My Jeep: 2014 3.6L


Join Date: Oct 2012
Location: Northern NJ, USA
Posts: 529
Thanks: 50
Thanked 51 Times in 37 Posts
Rep Power: 15237


Re: Pricing hijinx?
Quote:
Originally Posted by mcfarl58
If that's true though, then it's best to say no to the rebate then.
example: $10,000 + 6% = $10,600
or with rebate: $12,500 + 6%  $2500 = $10,750

As someone else pointed out, you still need to subtract out the rebate itself.
The math would be:
Employee Price + Tax on Employee Price + Tax on Rebate  Rebate = Final Cost:
10,000 + (6% * 10,000) + (6% * 2,500)  2,500 = Final. Cost
10,750  2500 =8,250.

12022013, 09:27 AM


Premium Member


Join Date: Jul 2013
Location: Medford, NJ
Posts: 882
Thanks: 109
Thanked 61 Times in 49 Posts
Rep Power: 141276


Re: Pricing hijinx?
Definitely check the tax laws in your state.
In NJ, where JoeyD and I are located, rebates are taxable. His math is correct for our state.
Also of note, for anyone purchasing a car out of state, the tax must be calculated based on state of final registration, not state of purchase. We bought ours in MD and I had to go over the NJ tax rules with our dealer to make sure the calculations were correct.
__________________
'16 Durango Citadel AWD True Blue Pearl On order
'14 Durango Limited AWD Deep Cherry Red
'05 Yukon XL Denali SOLD
'67 Corvette Stingray

12022013, 09:42 AM

Member


Join Date: Sep 2013
Location: Michigan
Posts: 101
Thanks: 0
Thanked 1 Time in 1 Post
Rep Power: 1134


Re: Pricing hijinx?
Quote:
Originally Posted by JoeyD
As someone else pointed out, you still need to subtract out the rebate itself.
The math would be:
Employee Price + Tax on Employee Price + Tax on Rebate  Rebate = Final Cost:
10,000 + (6% * 10,000) + (6% * 2,500)  2,500 = Final. Cost
10,750  2500 =8,250.

Right, even with that it's not the same as what the dealer did. The dealer added the tax to the EP + rebate price, then subtracted the rebate.
Dealer did this:
$10,000 + $2500 rebate + (taxes of 750) = $13,250
THEN subtracted the rebate = $10,750
Should be: $10,000 + 600 tax on EP + 150 tax on rebate  $2500 rebate for a price of $8250 like you said.
I thought his math was a little fuzzy.

12062013, 06:54 AM


Member


Join Date: May 2013
Posts: 116
Thanks: 0
Thanked 5 Times in 4 Posts
Rep Power: 1283


Re: Pricing hijinx?
My... head... is hurting...
__________________



Thread Tools 

Display Modes 
Linear Mode

Posting Rules

You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts
HTML code is Off



Similar Threads

Thread 
Thread Starter 
Forum 
Replies 
Last Post 
Accessory Pricing

Jeepney 
Grand Cherokee  WK2  
1 
08312012 05:16 PM 
Affiliate pricing

QuickOne 
Grand Cherokee SRT  WK2 
98 
09152011 10:16 AM 
2012 pricing

jp467 
Grand Cherokee  WK2  
1 
08012011 11:42 PM 
Affiliate Pricing

gonzanc 
Grand Cherokee  WK2  
10 
04102011 05:43 PM 
FFP pricing

bosca418 
Grand Cherokee  WK2  
6 
01232011 03:57 PM 

» Recent Threads 















