OPINION: New car tax to hit like a sudden flat tire

Of course, as long as you keep driving your current vehicle, nothing changes. You’ll continue to pay your annual car whenever your birthday rolls around.

But in 2013, car purchases and sales in Georgia are going to change big time.

That’s because the annual car tax is being replaced by an up front, one-time sales tax. On top of that, you’ll have to continue paying your $20 car registration fee each year.

There’s not been much talk about this, but people will begin to fume in 2013. And I’m not pleased either.

Here’s my situation: My car tax this month was $63. And as long as I stick with my 2000 Honda Accord with 220,000 miles, I’ll keep paying that. But I can only milk an old car for so long. At some point soon, I’ll have to go car shopping.

So, let’s say I decide to go with a little nicer vehicle the next go around. What if I want a $20,000 car or minivan with more room for the family?

Let’s say I decide to put down $3,000 and finance the rest. Well, the up front cost will go from $3,000 to $4,400 due to the new tax.

The car tax will be seven percent of the vehicle’s value at the time of the sale. Seven percent of $20,000 is $1,400.

That means everyone’s down payment on any vehicle will rise substantially — for instance, by 46 percent for anyone putting $3,000 down on a $20,000 vehicle.

If you buy or sell a used vehicle from an individual, then you must pay the tax on the book value for the make and model of that car. Well, does the book value account for needed transmission work? Remember, the value of a used vehicle has a much greater range than a new car depending on condition. And such values are the source of considerable negotiation between buyer and seller.

But the state will determine the appropriate tax and value of the car, not those negotiating the transaction. So, you may have a car valued at $5,000 according to the books, but a vehicle only really worth $3,500 in the used car market. This will make that car incredibly difficult to sell, since a buyer will have to fork over taxes for a $5,000 vehicle.

That’s where the tax gets really tricky too. Consider how it will affect car sellers. They’ll have a harder time getting people to bite on deals, since every purchase will include a big, up front tax. It’s likely that car sales in Georgia will decline as a result.

On the positive side, some folks will have to shop more in their actual financial range. A person who wants to finance a $40,000 vehicle — but who really has no business spending that much — will now have to fork over an additional $2,800 at the time of purchase. This should slow down reckless purchases by people wanting nicer cars than they can afford.

This new sales tax was set by state legislators who are looking for new ways to generate revenues. Consider that getting the tax funds up front — instead of annually — will allow the state to gather that money and generate revenue off of interest. (That also means you won’t have that money and won’t be able to invest it or make those funds work for you.)

Likewise, are you really going to keep a car long enough for your one-time fee to off set the annual tax? For instance, if you pay $2,000 up front, you might have paid only $100 a year on your annual car tax. That means you’d have to keep that car 20 years to get your money’s worth on the up-front cost. Those are rough numbers, but you get the picture. And if you buy another car in the meantime, then the state basically gets the profit off the years that weren’t covered by the up-front bill.
No doubt, this could prove a windfall for the state on the backs of car owners.

I’d rather keep the status quo on car taxes. Let me pay it annually. That $63 didn’t hurt too bad this year. But an up front $1,000 to $2,000 on my next car purchase will really stink. I don’t want the state injecting a new tax into the car market that will have a huge impact on supply and demand.

The changes aren’t scheduled to take affect until March. Perhaps enough people will get wind of this and demand the state legislature revisit its poor decision in 2012.

Otherwise, get ready for that new car stink to accompany that new car smell.

Zach Mitcham is editor of The Madison County Journal.