Could You Deduct Interest on a Used Car Loan? New Tax Law Sparks Optimism in Vermont
📢 UPDATE - June 2025
🚫 Important Clarification: The U.S. Senate has proposed that the new auto loan interest deduction does not apply to used vehicles. The deduction is limited to new vehicle purchases only that meet specific criteria under the One Big Beautiful Bill Act. While early interpretations left room for optimism, the US Senate has now removed ambiguity. In conference, changes still could be made but must parties believe that the House will concur with the Senate version of the bill, removing any deductibility for interest on used vehicle loans.
We're leaving the original article below for historical context but encourage buyers to consult with a tax advisor and explore other cost-saving options available when financing a used car.
🚘 New Car Loan Tax Deduction Could Help Vermont Drivers-Even on Used Cars?
A surprising and potentially exciting development has come out of Washington with the recent passage of the One Big Beautiful Bill Act. While most of the attention has centered on changes to EV credits, Central Vermont Auto Mart, your trusted dealership for used cars for sale in the Barre - Montpelier area, is digging deeper into a new provision that may benefit a wide range of car buyers.
Under Section 110104, buyers can deduct interest paid on certain auto loans-and there's some speculation that used cars may qualify.
📋 What's in the Bill?
From 2025 to 2028, car loan interest that meets specific criteria won't be taxed as personal interest-meaning you can write it off. To qualify, the vehicle must:
- Be purchased for personal use
- Be secured by a first lien on the vehicle
- Have final assembly in the U.S.
Ineligible loans include those for:
- Fleet or commercial vehicle purchases
- Vehicles with a salvage title
- Vehicles sold for scrap or used parts
- Leases or cash-out refinancing
But here's what's raising eyebrows...
🧐 Could Used Vehicles Really Be Included?
Nowhere can we find where the bill says the vehicle must be new. And that's the key. If lawmakers had intended to restrict the deduction to new cars, they could have spelled that out. Instead, they call out exceptions like salvage title vehicles and cars bought to be scrapped; conditions typically associated with used cars.
This has led some to believe the deduction could extend to qualified used vehicles for sale in Vermont, as long as they meet the personal-use and assembly location rules.
And that's great news for value-conscious buyers looking for tax credits for used cars and trucks.
🔍 What It Means for You
At Central Vermont Auto Mart, our team specializes in helping Vermont drivers find quality used cars, trucks, and SUVs that meet a variety of needs and budgets. With this new provision, shoppers may benefit not just at the dealership-but on their taxes, too.
If you're exploring the best places to find a used car for sale in Vermont, don't wait to get started. Interest rates and vehicle eligibility could shift. Knowing your options now puts you ahead of the curve.
Our team is watching for official IRS clarification and will keep you posted. In the meantime, we're ready to help you explore used auto loan options that could benefit from this rule-should it remain in place.
Your Vermont Smart Buying Destination
Whether you're plans call for a fuel-efficient sedan or a ready for a do anything-go anywhere 4-wheel drive pickup, Central Vermont Auto Mart is proud to be one of the best dealerships in Central Vermont for a huge selection of makes when it comes to pre-owned vehicles. We offer an extensive selection, featuring vehicles from approximately 20 different brands, providing a wide array of options to you. If you're thinking about buying, selling your vehicle, or trading in, now's a good time to explore your options before summer demand surges.
We're located right in Montpelier, and we're here to help you not only get the right used car, truck or SUV, and hopefully even a better tax outcome too.
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Published May 23, 2025 | Updated June 25, 2025
