FairTax Overview
Actual cost of purchasing a new car
(Wages that must be earned to buy new car)
Current tax
system
FairTax
system
(25% Interest
rate drop)
$30,659
$3,066
$27,593
$30,659
$3,066
$27,593
Interest rate**
4.04%
3.03%
Interest paid at above rate for 48 months
$2,336
$1,741
—
$9,198
Components of new car cost
NADA average vehicle price*
Down payment of 10%
Auto loan amount
FairTax on new car purchase
Income tax on interest
$654
Payroll tax on interest
$179
Payroll tax on principal
$2,345
Income tax on principal***
$8,585
Total taxes
$11,763
$9,198
Total new car cost including taxes
Percent difference
$44,758
$41,597
-7.06%
*NADA DATA 2012, new vehicle average selling price for 2011.
**National new auto loan rates for April 4, 2013, www.bankrate.com.
Interest rates will drop by 25% under FairTax.
***Assumes purchaser is in the 28% income tax bracket.
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