Ask Jack: You've Got to Know When to Fold 'Em

Years from now — perhaps even now, for the younger generation — I think people will have trouble understanding that a significant percentage of humanity used to derive a good living from arbitrage of one form or another. We live in a world now that has been effectively flattened by the standardized shipping container and the Internet. It was not always so. Think of Max Hoffman towing one Beetle behind another one all the way from an East Coast port to a Midwest town then taking the train home.

Even more interesting is that people used to be accustomed to paying money for information and/or access to knowledge. For instance, my old pal Alex Roy grew up in his father’s business, Europe By Car, which was (and still is) a service that arranged overseas rentals for American customers. Can you imagine that there was once a time when people couldn’t just click a couple of buttons and have a rental car waiting for them in London or Stuttgart? Crazy, I know.

The imperial ease with which we command the delivery of things from China or arrange hotel rooms in Zurich from the comfort of our living room in Milwaukee sometimes blinds us to the fact that sometimes you just have to deal with the impacts of distance and displacement. Our friend Brent is experiencing one of those times, at least by proxy.

My mother in law is moving from sunny SoCal to the upper Midwest. She currently has a Jeep Cherokee, but she likes small cars and once had a Hyundai Elantra and she would like to have another one. While I would love to have a URAL 4320 Expedition Truck for those two days every five years the weather is too bad to go to work I think she will be fine with a small front wheel drive car since she will be retired and has nowhere she needs to be that can’t wait for the weather to clear. Here is her question though — she would like to know if she is better off financially bringing the California Jeep to the upper Midwest and trading it, or should she trade it out there and bring her new car back?

This is the kind of question I really dig because there are so many factors to consider. In this case, however, just like the Magic 8 Ball, all the signs point in one direction. Here are some of my thoughts:

Cars, like eggs, are cheaper in the country. California and New York are, in my experience, the worst places in America to buy a new car. The dealerships incur tremendous costs thanks to high labor and real estate pricing and they have no compunction whatsoever about passing along those costs to the customer. All else being equal, you’ll pay more for a new car in California than you will in, say, Michigan. You’ll also get less money for your used car because the dealer needs more margin.

Taxes are higher in California. Sales taxes in the People’s Republic can range up to 8.25 percent. Maybe more, for all I know. There’s no place outside Chicago that charges that kind of sales tax in the Midwest. Also, California doesn’t let you count the trade-in against the sales tax calculation. In Ohio, if you trade in a $25,000 car on a $50,000 car, you pay $25k worth of sales tax. In California, you pay $50k worth of sales tax. Michigan is somewhere between the two.

Registering a car is more expensive in California. So do it somewhere else.

Each mile on a car is cheaper than the previous one. There are obvious exceptions to that, most of them having to do with buying an S-Class Benz right before the air suspension goes full Hindenburg, but if you have the choice between putting 2,400 miles on your old Cherokee or a new Elantra you should pick the Cherokee. Chances are the trade-in value won’t drop that much from the mileage. So put it on the old car.

I suspect, but can’t prove, that a Jeep might carry better resale value in the Midwest. Your mileage may vary.

It can be a real hassle moving a newly titled car across state lines. A lot of it depends on which state you’re heading to, of course. In the absolute worst-case scenario, you might end up paying certain taxes twice.

So that’s my opinion on the matter. There is one thing that might be worth exploring: selling the car privately in California, collecting the money, then flying or taking a U-Haul to the new state, at which point your mother-in-law buys the Elantra of her dreams. Try running the numbers both ways and seeing what you get. While you’re doing that, take a minute to marvel at the fact that the differences between states have not been completely flattened by the Internet and the information economy and the modern corpo-tocracy. Cherish that for a moment. Someday it might matter a lot more than it does now.

[Image: Fiat Chrysler Automobiles]