Can you explain the new car tax?

April 23, 2013 22:58 by Consumer Ed

Dear Consumer Ed:

I’m confused about the new car tax.  If I sell my car to my sister, will she have to pay tax?

Consumer Ed says:  

For the answer to this question, we went to the Georgia Department of Revenue, for whose assistance we are most grateful.

Let’s look at the specifics about the tax before exploring whether your sister will have to pay the new tax.  It is called the title ad valorem tax (“TAVT”) and was passed by the 2012 Georgia General Assembly with additional amendments made during the recent 2013 legislative session.  It became effective on March 1, 2013, and, until December 31, 2013, the current TAVT rate is 6.5% multiplied by the “Fair Market Value” of the vehicle.  To determine the Fair Market Value of a new motor vehicle, use the greater of the retail selling price or the value listed in the Department of Revenue motor vehicle assessment manual. Then reduce that number by any rebate or cash discounts you received from the dealer. For a used vehicle, the Fair Market Value is the usually the amount listed in the Department of Revenue motor vehicle assessment manual.  Whether the motor vehicle is new or used, there is a reduction for the trade-in value before the TAVT is imposed when the vehicle is purchased at a dealership. 

With the new tax, vehicles purchased on or after March 1, 2013 and titled in Georgia are exempt from sales and use tax and the annual ad valorem tax, i.e. the “birthday tax”.  Instead, the purchased vehicles are subject to the new, one-time TAVT.  Vehicles purchased through a private sale (non-dealer sale) that were previously exempt from sales tax are now subject to the TAVT.  If you purchased the car between January 1, 2012 and March 1, 2013 and had the car titled in Georgia, you are eligible to opt in to the new TAVT system, which will allow you to avoid the annual ad valorem tax after you opt in.  If you qualify to opt in, you will get credit for any sales tax and ad valorem tax previously paid up to the amount of TAVT due.  However, if the sales tax and ad valorem tax previously paid is less than the TAVT due, you will need to make up the difference when you opt in.  This option may only be exercised through February 28, 2014.

Your sister, as an immediate family member, may or may not have to pay the TAVT when she purchases the car from you.  An "immediate family member" is defined as your spouse, parent, child, sibling, grandparent or grandchild.  It is very important to remember that both you and your sister will have to complete an affidavit affirming that you are immediate family members. 

For immediate family members who buy or inherit a vehicle, their obligation to pay the TAVT depends on whether you, as the former owner of the vehicle, have already paid the TAVT.  If you have not paid the TAVT and are paying annual ad valorem tax on the vehicle, your sister has two options: (1) continue to pay annual ad valorem tax on the vehicle, and therefore not be subject to the TAVT; or (2) your sister may elect, at the time she purchases your vehicle, to pay the TAVT based on the current Fair Market Value of the vehicle at the applicable rate for the current year (i.e. 6.5% of the Fair Market Value for 2013) On the other hand, if you were eligible to opt in to the new system and did opt in, or if you otherwise paid the TAVT when you first acquired the vehicle, then her TAVT rate will be 0.50% of the value of the car when she purchases it from you.

Don’t forget that vehicles subject to the TAVT are still subject to the $18 title application fee at the time the vehicle is titled.  Vehicle owners must also annually register their vehicles in their home county and pay the associated $20 renewal fee. 

For more information about the TAVT, visit the Motor Vehicle section of the Georgia Department of Revenue website at http://motor.etax.dor.ga.gov/motor/MVDOnline.aspx.

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Will co-signing a loan for my daughter affect my credit?

February 22, 2013 18:18 by Consumer Ed

Dear Consumer Ed:

My daughter wants me to co-sign a loan for a car. If she is late on a payment, will this affect my credit, as well as hers?

Consumer Ed says:

Yes, when you co-sign on a loan, of any kind, both you and the borrower put your credit scores at risk.  If your daughter is late or misses a payment, this fact will be reflected on your credit reports and may negatively affect your credit ratings.  Any late or missed payment will affect your daughter’s creditworthiness as well.
   
There are a number of other responsibilities and risks that you might want to consider before you agree to this co-sign arrangement.  First, you need to understand that cosigning a loan is the same as guaranteeing a debt.  This means that if your daughter does not pay her own debt, you will then have to make the payments for her.  Second, in most states, including Georgia, if the borrower misses a payment, the lender can immediately collect from you as the cosigner.  Therefore, you should carefully evaluate your own finances and only co-sign on the loan if you can afford to pay off the loan plus any potential late fees or collection costs associated with the account.  
   
It is very common for parents to cosign on a child’s loan.  Assuming your daughter pays at least the minimum due every month, this arrangement will help her establish or re-establish good credit.  As her parent, you are better equipped to evaluate whether your daughter is financially responsible and if the terms of the loan are an economically feasible undertaking for her. 

If you decide to cosign on her loan, you should then take appropriate steps to protect yourself and your credit as much as possible.  One way to do this is to try to limit the terms of your obligation.  For example, you can request a contract that states, “The cosigner will be responsible only for the principal balance on this loan at the time of default.”  The lender is not required to consent to your request, but may if asked. You could also ask the lender to agree, in writing, to notify you in the event you daughter ever misses a payment, prior to effecting collection.  Early notification will help you prevent any potential problem from escalating to the point where you would be asked to repay all at once the entire amount owed.  Finally, get copies of all of the important documents involved in the transaction from either the lender or the borrower—the loan contract, Truth-in-Lending Disclosure Statement, and warranty.

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Car mechanic is giving me the run-around

January 24, 2013 00:57 by Consumer Ed

Dear Consumer Ed:

I dropped my car off to a repair shop 6 weeks ago and I still don't have my vehicle. I was given a verbal estimate of $400 the first week and told that it was a bad crankshaft sensor and a bad ignition coil. I've been calling every day to stay on the company to check the status of my vehicle, but the mechanic has given me the run-around every week. Now the mechanic is quoting an $880 price tag and is still giving me a run-around.  The estimates I’ve gotten have been verbal, not written.  Do I have any legal recourse or is this normal?

Consumer Ed says: 

You didn’t say whether or not the mechanic has actually performed any work on your car.  If the mechanic hasn’t actually performed any work or maintenance on your car, get your car back and take it to several other repair shops to get additional diagnoses and estimates.

If the mechanic has already worked on your car, and you refuse to pay the repair bill, the mechanic can legally keep your car until you pay for the repairs.  So, you should pay the bill, making clear in writing that you disagree with what has been charged and are paying under protest.  However, you should take certain steps before you pay the bill so you are protected in case of potential legal actions against the mechanic.  If the amount the mechanic charged is much higher than the estimate, or if the work was done without your authorization and you feel that you have been overcharged, question the bill—again, in writing as well as verbally.  Have the shop write out the reasons for the difference in cost, and keep this written explanation together with the work estimate, final bill, and other paperwork.  You can also send the mechanic a written demand to return your old parts.

After paying the bill and getting your car back, you may be able to take legal action against the mechanic, but you should consult an attorney to discuss your options.  You can also submit a complaint to the Georgia Governor’s Office of Consumer Protection (“OCP”) by calling 404-651-8600, or visiting our interactive website at www.consumer.ga.gov.  While OCP does not represent individual consumers, it does look for patterns of unfair and deceptive business practices and may decide to conduct an investigation now or in the future.

You also could take your car to another repair shop as well. Give the second mechanic a copy of your itemized receipt from the first mechanic.  Request that the second mechanic inspect the repairs completed and the parts sold by the first mechanic. Get the report from the second mechanic in writing.

In the future, there are several precautions that you can take when getting your car repaired:

•    Ask for a written estimate before you authorize repairs.

•    Ask if repairs are guaranteed, and get the guarantees in writing.

•    Research the mechanic and repair shop using the Better Business Bureau, online search engines, and friends and family.

•    Get several estimates from different repair shops.

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