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03-21-2013, 08:03 AM | #1 |
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Sales Tax when Buying Out a Lease
I looked at a payoff quote on my lease from BMWFS. I'm a little over half way through a 36 month lease. The payoff quote shows no sales tax. I'm trying to figure out if buying the car out equates to a refinance, hence no sales tax, or if I would be responsible to pay it on my own.
Salesman doesn't seem to know. BMWFS won't commit.... Does anyone have any experience with this?
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03-21-2013, 08:25 AM | #2 |
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In most states, you would pay sales tax on the buyout price. Since you have only paid on the down payment and the lease payments made so far, that would make sense.
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03-21-2013, 08:40 AM | #3 | |
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I'm thinking though since it show's it as a "payoff quote" though that maybe not. Cause if you were to pay off a car loan early, you certainly wouldn't pay sales tax on an early payoff.
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03-21-2013, 08:41 AM | #4 |
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Plan on adding sales tax unless you're in a state that makes you pay tax on the whole purchase of the car in your lease. I'm not sure what happens in those states. BMW FS does a good job staying out of this because when you do a buyout, you pay tax at the DMV when you go to transfer title. BMW doesn't collect it, therefore it's not part of your "purchase" price.
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03-21-2013, 08:52 AM | #5 |
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Sales tax is always charged at lease initiation. Typically it is rolled into your lease payment as part of the Net Cost. You can opt to pay it as part of your up front cost, but most do not because leases typically end early. Check your contract.
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03-21-2013, 09:23 AM | #6 |
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Your payoff amount $$ value looks lower without taxes in the number. Most companies in the US dont include tax into final price ... You get a price before tax which is annoying as fuck to me. In Australia it's all in the total price which is great cause there's no bs you know what your total outlay is. Just my opinion
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03-21-2013, 09:27 AM | #7 |
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Dammit.
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03-21-2013, 09:40 AM | #8 |
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Good to know information here.
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03-21-2013, 10:44 AM | #9 |
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It varies by state but I think you generally always have to pay sales tax on the residual if you are buying at lease-end. This is because you are buying the car from BMWFS (lessor), which is a taxable event because it results in a name change on the title. In most states, that doesn't really equate to double taxation because during the lease term, you've only paid sales tax on your payments, not the residual.
If you are unlucky enough to live in Illinois or Texas (like me), you pay FULL sales tax at lease initiation AND pay tax on the residual again if you buy the car at lease-end. That's why they offer Owner's Choice financing here, which I just did for the first time on my current M3. It's basically just a way to avoid that double taxation by structuring it as a purchase from the beginning so that purchasing at end of term is not a taxable event (because my name is already on the title).
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03-21-2013, 11:41 AM | #11 |
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I just leased a new E class for my wife. I can tell you with 100% certainty tax is included in a lease payment. It has to be treated as a vehicle sale.
Basic calcs: [(Net Cost - Residual) / Term] + [(Net Cost+Residual)*Money Factor)] + [Tax on sale price/Term] = Monthly Payment Net Cost is your negotiated purchase price minus any down payment (excluding dealer fee and 1st month payment). Hope this helps.
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03-21-2013, 12:22 PM | #12 | |
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In California, you pay sales tax on the price of the buyout, since tax is not included (in it's entirety) in the payment. |
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03-21-2013, 12:38 PM | #13 | |
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03-21-2013, 02:36 PM | #14 |
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Why are you buying it out early?
If you wait till the last 3 months, BMWFS will sell the car to a dealer at auction price. If you have a cool sales person, they can make an easy $1,000 and you could save a few thousand. .
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Let me get this straight... You are swapping out parts designed by some of the top engineers in the world because some guys sponsored by a company told you it's "better??" But when you ask the same guy about tracking, "oh no, I have a kid now" or "I just detailed my car." or "i just got new tires."
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03-21-2013, 03:59 PM | #15 | |
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03-22-2013, 07:27 AM | #18 | |
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As for the rest, if I keep it at the end of the lease, you're 100% correct about trying to get a "deal".
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03-22-2013, 08:15 AM | #19 | |
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Obviously you need to be sure you get paid the difference between your residual price and the price you sell the car to the third party. Don't let the dealer take this from you!
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03-22-2013, 08:34 AM | #20 |
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In Cali, you have 10 days to sign the car over to someone and not get charged tax.
This way, you can buy the car, and sell it right away and there's not tax to you. I have personally done this a few times.
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Let me get this straight... You are swapping out parts designed by some of the top engineers in the world because some guys sponsored by a company told you it's "better??" But when you ask the same guy about tracking, "oh no, I have a kid now" or "I just detailed my car." or "i just got new tires."
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03-22-2013, 10:34 AM | #21 |
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When I bought out a lease on an earlier car in Texas, I was hit (quite unexpectedly!) with sales tax on the buyout amount. However, my lease payments did NOT have sales tax charged on them when I was making payments, which was an interesting surprise since when I was living in California, payments DID have sales tax added onto them.
But I believe with BMW and most other places, the payoff quote is only what you owe the lessor, not the gubmint.
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03-23-2013, 12:23 AM | #22 |
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In California you would pay sales tax on the buyout price when you go to title the car at the DMV.
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