What's the catch? Trading in my 2021 PP for a 2022 PP.

a lot of it is broken promises, so you won't know until you know.

and keep in mind there will be taxes and fees on the new car.

the tax credit is suspect too, make sure you qualify

 

All that glitters is not gold.
As far as this site, there has been many reports of dealer add ons and/or markups.
That is if there is even a car to speak of.

Dig deeper...due more diligence

With some persistence, anything is possible. May have to purchase out of state.

 

As mentioned above there will be taxes and fees on the new car purchase. Be sure your tax liability is high enough to benefit from the tax credit. That said, go for it and report back.

 

This isn’t an entirely new phenomenon - there appears to be a gap in used car pricing for PP (at least in Massachusetts) where they don’t account for the tax credit when pricing new / used vehicles. I personally have traded in multiple PPs over the years for a newer model where I either break even or profit, depending on manufacturer promotions. The used car market is just making things more pronounced these days.

A couple words of caution (some of these have been wisely mentioned by other members)

If you make a profit trading in your old car, you owe capital gains tax. The tax credit reduces your cost basis when calculating your gain. Short term gains tax will equal your income tax rate, generally speaking.

Make sure you qualify for the tax credit. If you won’t have $4,502 of liability, you won’t qualify for the full credit.

Make sure there is no market adjustment, or at least include all adjustments and add-ons to do your math. Many are seeing adjustments of ~$4k; I was just able to negotiate that down to $1k earlier this week, but many places will refuse to negotiate (they really don’t have to).

Laws seem like they’re going to change next year, and there’s a strong possibility that PP will no longer qualify for any tax credit. If I weren’t able to purchase the car by EOY, I wouldn’t have purchased one. I’m skeptical that I’d have been able to claim a credit for 2022.

 

Market adjustment is just an additional fee dealers add to MSRP because demand is high and supply is low. It is NOT related to any items or services added by the dealership.

I can’t predict what will happen if BBB passes, and I can’t say anything about timing. It’s *possible* that, if BBB passes before tax time and eliminates the credit for the PP, it won’t matter if you purchased the vehicle before BBB. They could decide that BBB is the law for all of 2022, they could decide to allow both. When it comes to tax law, there are no guarantees. I personally decided I wouldn’t make that bet, too much uncertainty for me.

 

Also dealer doc fees may be increased.
A dealer on the east coast does not mark up, or have much add ons, but they have increased the doc fees (I think about double)
Which does not translate into much, i.e. ~$500 if that.

No one knows what happens in the future for the fed tax credit. Anything is possible.
If you can sign/take delivery for one in the next 7 days....least amount of risk of not losing that $4502.

 

If you have an HOV sticker, remember the pain and waiting you went through to get it. Mine was a five month process. I don’t believe the HOV stickers are transferable between vehicles, so you’d need to reapply for the 2022 PP.

 

As a rough example (now, this is in Massachusetts, so your mileage will vary)

I was offered $28,000 for trade for a 21 PP that I purchased in July for $24,000 (this was including a $5,500 manufacturer rebate offered at the time). The dealer was then offering me a new 2022 PP for $29,624 (including a $1,000 market adjustment and ($1,500) manufacturer rebate) . Some quick math suggests that, after the $4,502 rebate on the 22 PP, I’ll be ahead nearly $3k!

Not so fast.

First: fees. $500 doc fees, then add title and registration fees. Roughly $675 total here.

Second: Taxes. In MA, I only pay sales tax on the difference between trade and new vehicle (plus some fees). So in this case that was roughly $130. In CA, I believe residents are charged the full amount of tax regardless of trade value; for a $28,000 vehicle, thats ~$2,000. If you choose to sell your car to Carvana and buy a new car at a dealership, you’ll pay the full amount of tax regardless.

Third: MORE TAXES. I owe tax on the profit that I made trading in my 21 PP. I calculated my gain by subtracting the cost basis of my old vehicle from the trade in price. The costs basis for that vehicle is the purchase price plus tax and some fees, minus the manufacturer’s rebate, MINUS THE FEDERAL TAX CREDIT. In this case thats ~$29,500 + $675 - $5,500 - $4,502 = $20,173

So, the capital gain for my 21 PP is $28,000 (my trade value) - $20,173 = $7,827. That is a short term capital gain. I have to pay tax on that, which for me is around 24% or ~$1,900.

This is self-reported. A life philosophy of mine is to avoid instigating the IRS.

The reality of that “$3,000” profit is closer to $295. Still not a bad deal for a newer car, but if I were in California and had to pay the full amount of sales tax I would be losing nearly $2,000.

 

I've noted elsewhere that we've done this for three consecutive years, finding it more cost-friendly than buying wiper blades every year or so (or tires)!

We love our Primes but, depending on the ramifications of BBB, may be replacing one of our gassers with a larger qualifying BV this year.

 

I’ve also done this for a few years! And yes, I expect this to be my final Prius Prime. Once I move to a single family home with charging capabilities (and if BBB passes with seemingly strong incentives) I’ll likely move to full BEV.

 

Yeah, it's tempting, but without a big rebate and tax credit, your new purchase may not come out ahead.

If I can get another $4502 tax credit on this year's tax return, I would have traded in my 2021 PP I purchased in July this year for a brand new 2022 PP with the current $1500 Toyota rebate. But, I don't anticipate that big of tax liability this year. If I wait for next year, I am not sure if I can get another $4500 tax credit.

DO your math first.