Not your father's automobile tax

Customers shop for new cars before the state levy increases

January 02, 2008|By Matthew Dolan | Matthew Dolan,Sun reporter

Balu Balasubramanyam, an amiable father of three, started out brightly on this year's first day to buy a new Toyota Highlander.

But once told of the state's impending tax increase, his easy smile turned upside down.

"I mean, where do the taxes go now? And they're increasing them on cars for road improvements? The roads I take to drive my son to school every day have had potholes for four or five years," said the 42-year-old software architect from Gwynn Oak.

For Marylanders who will be paying $1 more a pack for cigarettes and a cent more on the dollar on most other items under a separate sales tax increase, the next few days offer up options for those hunting new wheels.

FOR THE RECORD - An article in yesterday's Maryland section misstated the effective date of the state's new vehicle titling tax. The tax increase from 5 percent to 6 percent went into effect Tuesday, not today.
THE SUN REGRETS THE ERROR

For those who plan to buy a new or used vehicle without selling one back to a dealer, today could be the time to close the deal. Tomorrow the state excise tax on titling a vehicle will increase by one percentage point, from 5 percent to 6 percent. Revenues from the tax help finance improvements in roads and mass transit as part of the state's dedicated transportation fund.

Many customers interviewed yesterday said they had never heard of the looming 20 percent tax increase. For those who did, none said it would have a significant impact on their ability to sign on a car dealer's dotted line, if the price were right.

Watching his 1-year-old son play in a toy house inside the showroom at Apple Ford in Columbia, Chris Schulz said the idea of paying more in taxes for road improvements didn't faze him.

"I know roads in Nebraska and in Virginia, where I have family, and I'll tell you: The roads are better here. I don't mind paying more to keep them that way," he said after test-driving a used Ford Expedition.

Several would-be buyers said the general state of the economy, marked by a soft housing market and rising gas prices, gave them more pause than any title tax increase.

"I'm just trying to reduce my car payments. My truck's too expensive," said a harried Geraldine Hicks, who walked into Russel Toyota on U.S. 40 in Catonsville yesterday morning in search of a less-expensive vehicle.

Still, car and truck dealers tried to use the tax increase to their advantage, employing it as ammunition in their newspaper advertisements and sales pitches.

"Most people haven't heard about it, so we use it as a closing tool," said Scott Rippy, sales director of Apple Ford in Columbia.

Bob Bell's Kia dealerships in Baltimore and Glen Burnie urged customers to "buy now and beat the 20% tax increase." So did Antwerpen in Randallstown and Apple Ford in Columbia (whose ad erred slightly with the start date for the tax increase, which doesn't begin until tomorrow).

That's about $400 more on a roughly $40,000 black Highlander that caught Balasubramanyam's eye at Russel Toyota.

But under a provision passed by the General Assembly and signed by Gov. Martin O'Malley late last year, the new tax law could be a significant boon for those looking to trade in their vehicles.

The 6 percent titling tax will be applied to the price of the new vehicle, minus the value of the trade-in, a calculation that many dealers believe could improve business for the struggling industry. Previously, the tax was based on the price of the newly purchased vehicle, with no allowance for trade-ins.

"We would never advocate to have the tax increase, but if you're going to increase the tax, we needed to change the way it was calculated," said Peter Kitzmiller, president of the Maryland New Car and Truck Dealers Association.

The period between Thanksgiving and Presidents Day is typically slow for sales, so dealers said they hope to maximize a benefit worth a couple of hundred bucks to lure in customers.

For David Fawcett and his wife, Julie, the time seemed right for a new minivan. The 34-year-old Ellicott City father of one said he scoured the Internet to compare prices before strolling into Russel Toyota yesterday just before noon to test-drive a Sienna.

Julie Fawcett heard something about rising taxes, but she said she was more concerned about the safety record of the van she'll use to ferry around 3-year-old Dylan.

"It's just time for us to get a new car," she said, adding that the family's current 2000 model has more than 100,000 miles.

Matt Bukowski, general sales manager at Russel, said sales for his dealership are up already roughly 40 percent in the last month over the same period last year.

Increasingly conscious of fuel efficiency, more customers are downsizing from larger vehicles to slimmer sport utility vehicles such as Toyota's RAV4, according to Bukowski.

"It's a now business and we're trying to create an excitement here that it's good to buy now," he said. "We want to give them every opportunity to buy the right vehicle today."

"But tomorrow," he added with a laugh, "we'll tell them why it's good to buy then, too."

matthew.dolan@baltsun.com

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