Auto Sales and Interest Tax Breaks 4 who?

2/7/09 Las Vegas, NV 

[caption id="attachment_390" align="alignright" width="420" caption="2009- Lincoln mkz"][/caption]

AUTO TAX BREAKS 4 WHO?

 

So the newest round of automotive bailout theory involves giving tax breaks to anyone making less than $250,000 a year, BUYING a NEW Car for less than $49,500.00

Okay, Car, truck, minivan, suv or crossover. Dodge, Chrysler, GMC, Ford, Chevrolet, Jeep, Pontiac, Saturn, Mercury, Lincoln, or any other brands are eligible.

 However, for the millions of folks that won’t qualify for a car note on a NEW vehicle or elect to LEASE or PAY CASH for a new 2009 model, this latest automotive stimulus effort means NOTHING. That’s right, $0.  This is a TAX DEDUCTION for the SALES TAX and INTEREST paid on the car loan. 

Matt Hardigree of CarpocalypseNow writes; “Senator Mikulski’s amendment, the Auto Assistance Ownership Amendment, makes interest payments on car loans and state sales or excise car tax-deductible for new cars purchased between November 12, 2008 and December 31, 2009, which, in turn, will help more Americans afford cars during these tough economic times and spur investment in America’s ailing automobile industry.”

 

I get the fact that buying a USED car doesn’t keep plants stamping, or automotive plant workers, truck drivers, parts manufacturers assembling, but I do think this latest proposal is amazingly one-sided.

As the automotive industry as a whole employs 1 in 4 jobs directly or indirectly, let everyone participate in the program.  Give used car buyers, cash buyers and leasing customers a credit too! Why should only those able to qualify for the loan, be rewarded? Why do those with exemplary credit who qualify for a LEASED vehicle lose out on the tax credit? What about the folks that have saved and scrapped to pay cash or use the 0% offers, they should be rewarded for their fiscal resourcefulness, not penalized.

Here’s the MYCARLADY AUTO STIMULUS AND TAX CREDIT PROPOSAL…

 Given that the average car loan is 72 mos. (6 years) and the average interest amount on that auto loan is $5,000… 

 Include all makes and models; 2007, 2008, 2009 and 2010 purchased between 12/31/08 and 1/1/2010.

1. Leasing customers, including FLEETS, get $2500.00 income tax credit per unit.
2. Customers paying cash for a car get a $5000.00 tax credit.
3. Small Business can take the interest credit or the Sec. 179 deduction for capitalized equipment purchases, not both.
4. Small Business owners can take the mileage deduct or the depreciation, plus the interest credit or the flat lease amount.

 What happened to the TARP money the car makers got?  Why wasn’t that money earmarked for car loans to consumers?  SO many folks need cars, want to buy, and can’t get a car loan, even at a 25% interest rate.  Realizing that credit has become so tight that many clients with formerly great 700+ credit scores are now suffering as their scores plummet, we need to get that money into the auto lending system so dealers can “move the iron”. The tax credit doesn’t mean anything if the consumer can’t buy, because there are no auto loan banks left. 

 This bill is misguided, rewarding a small percentage of the population.

The proposed auto tax break initiative needs to be bundled with a serious directive to make the funds already provided to the automakers get funneled to the lending institutions that make car loans; prime and second chance.

 Now before you start screaming about “second chance” car loans, unqualified buyers, and predatory lending, hold on and breathe.  The banks already hold the dealers to minimal rate mark-up, and carefully “screen” every buyer. (SCREEN= call the person and grill them on everything from features of the vehicle to date of employment.). Second chance lenders often install kill switches and GPS devices to track errant car owners missing a payment. The systems are in place to monitor the situation, if dealers had the finance support to sell cars. There are buyers, like the housing market, but no banks to carry the loans.

 The “Minnows” as Senator Mikulski (Maryland) refers to the targeted public of this bill, needs a loan before a tax break.

 

Sarah Lee writes about all things car related, is a constant car consumer advocate and car buyer’s agent. www.mycarlady.com for a great no hassle, deal on your next “tax break” car.

 

 

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