We’ve all heard the adage that “politics makes strange bedfellows,” and Governor Murphy proved it when he introduced his proposed 2026 budget. In his proposal, the Governor included several sales tax proposals to increase State revenues, and numerous groups pushed back to oppose the increases. One proposed option to increase State revenue was to eliminate the trade-in credit for new car sales. Dealers, OEMs, electric vehicle (EV), and environmental advocates — not normally on the same side of many issues — banded together to oppose the elimination.
Leading the charge, NJ CAR encouraged OEMs, EV, and environmental advocates to push back as a coalition. Though we held different perspectives, we shared the same opposition to the Governor’s proposal to eliminate the trade-in tax credit. NJ CAR dealers were troubled that, under this proposal, their customers would be discouraged from trading in their old cars and trucks. OEMs objected that the proposal would dampen sales of new cars and trucks if the contract price of the new cars were not reduced by the trade-ins. EV and environmental advocates oppose policies that increase the number of gas-powered cars and trucks on New Jersey roads, but we all agreed that the Governor’s proposal to eliminate the vehicle trade-in tax credit would likely extend how long consumers stay with their old vehicles.
We also agreed that the proposal would hit low- and moderate-income New Jerseyans the hardest. In New Jersey, consumers do not pay sales tax on the value of a trade-in. Instead, they get a sales tax credit from the value of their trade-in, which reduces the purchase price of a new vehicle. Simply put: Eliminating the trade-in tax credit would increase consumers’ cost of purchasing vehicles and threaten to tax consumers again if the Governor chose to tax consumers for the trade-in!
Under NJ CAR’s guidance, the coalition of OEMs, EV, and environmental policy advocates strategized a plan of action. First, NJ CAR educated the group on how the tax credit benefits consumers so they could echo our opposition at their respective meetings with legislators and other groups. Second, NJ CAR leveraged our access to Trenton-based business associations that opposed other sales tax proposals but were eager to learn how our issue affected them as consumers. By educating them on how trade-ins work, they could spread our message as they lobbied against the proposed budget overall.
Arming both groups with the facts, we explained that when a New Jersey consumer trades in a vehicle, a trade-in credit is applied to reduce the price of the new vehicle. To help illustrate this point, we provided examples of how the trade-in credit currently works in New Jersey and how it could work under the proposed changes.
The Impact of the Trade-in Tax Credit
If the total vehicle purchase price is $50,000, and the value of the consumer’s trade-in is $25,000, under the current law, the consumer would pay the sales tax (6.625%) on $25,000 ($1,656.25), NOT on $50,000 ($3,312.50). Therefore, the purchase price would be $51,656.25 instead of $53,312.50. This is a sizable savings. If the trade-in credit were eliminated, the full purchase price on a $50,000 vehicle would be $53,312.50.
NJ CAR further explained that the Governor’s budget packet lacked details regarding how his policy changes would be implemented. As a result, we knew the consumer would pay more under any plan. We feared that New Jersey wished to mirror California’s approach, where the trade-in tax credit would be removed entirely, and consumers would be taxed twice — once for buying a new vehicle, and again for trading in a used one. We also recognized that New Jersey could consider other options, such as eliminating the trade-in tax credit for luxury vehicles or for high-wage earners. Under all scenarios, the consumer would pay more.
The Fight to Keep the Tax Credit
NJ CAR convinced the OEMs, EV, and environmental advocacy organizations to formally unite in a signed coalition letter. Our letter highlighted how the coalition represented a broad spectrum of the private passenger vehicle market, including franchised new car and truck dealers, auto manufacturers, and the State’s EV and environmental advocates. The coalition letter was emailed to members and staffers of the Assembly and Senate Budget Committees, and coalition members distributed the letter to key contacts in the Legislature. The letter was also used to brief legislative leaders not on the Budget Committees. The intention was to impress upon the Legislature the weight of the historic coalition of dealers, OEMs, EV, and environmental advocates unified in opposition to a State budget policy, and urge them to join us in opposing it.
After that, NJ CAR testified in opposition at the Budget Committees in the Assembly and Senate. Our message to decision-makers was that eliminating this tax credit was a bad policy that would negatively impact consumers by making New Jersey less affordable for working and middle-class families. We also submitted written testimony and hosted Zoom calls with legislative leaders of both Committees, encouraging them to oppose the Governor’s proposal.
Tense negotiations were conducted between legislative leadership and Governor Murphy on his proposed revenue increases, and the Assembly was especially concerned about these proposed increases advancing the same year its members were up for re-election. Ultimately, the Governor’s Office withdrew the proposal to eliminate the vehicle trade-in tax credit. NJ CAR’s success in defeating Governor Murphy’s 2025 budget proposal was a collaborative effort, representing a rare opportunity for “strange bedfellows” to unify for a greater cause.
