PRESIDENT Donald Trump has introduced a longshot plan to cut taxes on car payments, and if it passes, drivers will save billions.
Trump announced his bid to help out consumers and bolster American manufacturing during his fiery first address to Congress on Tuesday night.
He said, “The next phase of our plan to deliver the greatest economy in history is for this Congress to pass tax cuts for everybody.
“I want to make interest payments on car loans, tax deductibles, but only if the car is made in America.”
Trump first floated this idea in November during a rally in North Carolina where he promised tax relief for car buyers.
The tax cut is part of Trump’s broader plan to reduce taxes for Americans, including a push to eliminate taxes on tips, overtime pay, and Social Security benefits.
The president hasn’t shared many details about the plan, but if the deduction is allowed without restrictions, it would cost the federal government $10 billion per year, according to estimates from the Tax Policy Center.
The auto loan tax break would apply only to American-made cars, which aligns with Trump’s “America First” economic policies.
He hopes to increase demand for US cars by giving buyers financial incentives and imposing tariffs on foreign carmakers.
This proposal could extend that effort.
However, Trump’s tariffs have faced criticism.
Some argue that they are too broad and may not effectively bolster the US economy or protect jobs.
The tax incentive could have a major impact in swing states like Michigan, Ohio, and Pennsylvania, where auto manufacturing is a significant economic driver.
On Wednesday, White House Press Secretary Karoline Leavitt said that automakers will get a one-month delay on the tariffs so they can plan.
SOARING PRICES
With car prices soaring and interest rates rising, the plan may offer relief to cash-strapped buyers.
Automakers may see a boost in sales, while foreign carmakers could face a hit as US consumers lean toward eligible models.
Financing for vehicles
There are 3 main types of car finance - personal car loans, Hire Purchase (HP), and Personal Contract Hires (PCH).
One of the simplest ways to finance your new car is through a car loan.
It involves borrowing money to buy the motor.
You will need to work out how much you need from the lender – a bank or building society – as well as how long you want to borrow the money for.
But with a personal car loan, you can drive as far as you like, and if the car picks up any damage to the interior, there’s no expectation to have this fixed unless you want to.
Hire Purchase is a handy option that lets you spread costs over monthly payments – until you finally own the car.
HP repayments might be slightly higher than with other options as you’re making regular payments to eventually own the vehicle.
But on the upside, it won’t penalize you if you don’t have a good credit history.
HP finance is secured against the value of the vehicle, so if you’re unable to stick to your monthly installments, the finance company could take the car back.
The third great option, with PCP finance, you won’t own the vehicle during the agreement – it will instead belong to the finance company.
You will be asked to put down a deposit and pay regular installments over the agreed term.
If you decide it’s time to give up your motor, you can simply hand it back or part-exchange for something new.
Car buyers are already feeling the pinch from high interest rates and rising vehicle prices, making the tax break a potentially welcome move.
Trump’s latest proposal is just one of several ideas to reduce the financial burden on Americans.
While the tax break is still in the works, it’s clear the proposal could change the landscape of car buying in America.
Car dealers are speaking out against the incoming tariffs and warned it will mean rising costs for drivers.
Meanwhile, Ford’s CEO said the changing economy will “blow a hole” in the industry.
And a car expert revealed the best time of the year to get deals on a new car.