Need Help w/ imagecreate() and imagecopy()

Hello Guys,

I stumbled on a problem with the implementation of imagecreate() and imagecopy().

Basically, what I'm trying to achieve is to merge 2 image... pretty straight forward, huh.

image 1 = image generated using imagecreate()

image 2 = pre-made image that's on our webserver - transparent / .png format

The problem is this... the image I created using imagecreate() and save it as imagepng() -- works fine until to the point of the implementation of imagecopy()... the overlap / pre-made image does have a background color instead of a transparent results.

But using the image created using photoshop as base image / image 1 and save it as .png format or transparent works great and produce the results that I wanted.

Here's the actual codes that I have.

<?php
// create image 
$image = imagecreate(336, 280);
$backgroundImage = imagecolorallocate($image, 0xff, 0x00, 0x00); // put background red
imagecolortransparent($image);

$filename = md5(strftime('%Y-%m-%d %T'));

imagepng($image, 'downloads/'. $filename .'.png');
imagedestroy($image);



// use the created image
$background = imagecreatefrompng('downloads/'. $filename .'.png'); // background image... get the saved image
$overlap = imagecreatefrompng('tmpl/images/eco_car.png'); // overlap - 296x133


//imagealphablending($overlap, true);
//imagesavealpha($overlap, true);

imagealphablending($background, false);
imagesavealpha($background, true);

imagecopy($background, $overlap, 0, 10, 0, 0, 296, 133);

header('Content-Type: image/png');
imagepng($background);

imagedestroy($background);
imagedestroy($overlap);
?>

I'm already out of ideas in this problem.

thanks in advance and more power to this forum site.