Days Ticking Down Before Sales Tax Increases On Cars

The seconds tick away on the Deal Depot website, much like on websites that count down the days and hours until the first college football kickoff.

On Thursday the website warned that only 16 days and a rapidly-shrinking number of hours, minutes and seconds remained in the "beat the sales tax hike" promotion at the dealership, where owner Darla Booher uses a video to inform customers that the price of most cars in South Carolina will climb by $200 on the morning of July 1.

"That's true, hard, extra expense," Booher said in the video, referring to the sales tax increase that was packaged into what is widely called the gas-tax legislation. It raises the cap on the vehicle sales tax from $300 to $500.

On a $10,000 car, Booher points out that lenders will typically ask for a $1,000 down payment in addition to the $300 sales tax and the $39 fee for tags. On July 1, that typical down payment will rise to $1,539.

Most auto dealers are less concerned, noting that the price of purchasing a vehicle in South Carolina remains a bargain in comparison to other states.

"I don't think it will make that much difference to most buyers," Kia of Anderson owner Bobby Wood said. "I don't see it as a deal-breaker.

"I can't say I like it, but we need to get roads fixed, and something has to pay for it," said Wood, an Upstate auto dealer for more than 40 years. "The good thing is, we'll still have a $500 cap. That's better than the tax in a lot of states."

As part of the legislation designed to send more funds to highway maintenance, the cost of registration remains at 5 percent of the sales price for cars under $10,000. Another part of the legislation is a provision that will force those relocating to the state to pay a $250-per-vehicle transfer fee in order to register the car in South Carolina. For someone moving from another state with two cars and a motorcycle, that means a hefty $750 fee on top of other registration requirements.

Like Wood, Anderson Ford new-car sales manager Tom Barber anticipates no significant impact on business, in part because lenders typically allow the sales tax to be included in the loan, which has the affect of spreading the tax across several months or years.

"I don't think it's going to affect anything," said Barber. "People who buy cars in North Carolina and Georgia are paying more than $500. We're still going to be cheaper on sales tax than those states."

In Georgia, the sales tax and annual renewal fee was replaced in 2013 by the Title Ad Valorem Tax (TAVT), a one-time fee of 7 percent of the auto value. In North Carolina, the Highway Use Tax is 3 percent of the difference in the sales price and the trade-in value — which means that the North Carolina fee is lower on a car under $10,000 but potentially higher (depending on the trade-in value) on a luxury car.

On a car worth $10,000, the tax in Georgia is $700, and the tax in South Carolina after July 1 will be $500. The fee in North Carolina is $300, but lower if a trade-in were involved. As in South Carolina, motorists in North Carolina are also subject to an annual auto property tax imposed on the county level.

Longtime Greenville auto dealer Stan Egan said used-car buyers will feel the pinch much more than new-car shoppers.

"If you can afford to buy a new car, it probably won't have an impact," Egan said, "but for a lot of people with limited funds, you've just made it a lot harder to come up with a down payment. Even if you wrap the taxes into the loan, on a car worth $10,000, you're paying $500 before you've put anything down on the car itself. That will hurt people who don't have $1,000 to put down on a vehicle."

One of Egan's concerns is public education on the tax increase.

“Very few people I’ve talked to know about it (the sales tax increase)," Egan said. "They know only about the increase on the gas tax…"

Follow Abe Hardesty on Twitter @abe_hardesty.

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