The lease game...I would like to understand...
08-05-2011, 10:42 AM
#81
In CT when you lease you pay sales tax on your payment which obviously includes a principal cost (depreciation) and the finance cost.
When you buy you pay sales tax on the vehicle purchase price. When your trade it in you get credit for the trade in value and don't pay sales tax on this value twice.
So when you lease you are paying tax on the interest / financing cost where as when you purchase you do not.
IMHO leasing makes financial sense when you can get a business to cover your cost.
If you need to buy your own vehicle then lease if you want a new vehicle every 2-3 years or simple don't care that much about the cost. If you want to maximize your financial position (if that is important to you) buy and drive them into the ground and buy used rather than new.
When you buy you pay sales tax on the vehicle purchase price. When your trade it in you get credit for the trade in value and don't pay sales tax on this value twice.
So when you lease you are paying tax on the interest / financing cost where as when you purchase you do not.
IMHO leasing makes financial sense when you can get a business to cover your cost.
If you need to buy your own vehicle then lease if you want a new vehicle every 2-3 years or simple don't care that much about the cost. If you want to maximize your financial position (if that is important to you) buy and drive them into the ground and buy used rather than new.
08-05-2011, 11:06 AM
#82
If you want to buy the car for the residual amount at the end of the lease, tax is then added to this amount at purchase.
Perhaps other states tax the entire amount upfront?
08-05-2011, 11:14 AM
#83
Go Big Blue!
I couldn't believe a person pays no tax in connecticut when buying a car so I had to google it.
http://www.ct.gov/dmv/cwp/view.asp?a=801&q=244520
Very strange rules but it seems you pay PROPERTY tax for cars and sales tax when you guy it out of state and drive it in.
I know the laws are vastly different from state to state but I'm sure the government is getting their piece one way or the other regardless of whether you buy or lease.
http://www.ct.gov/dmv/cwp/view.asp?a=801&q=244520
Very strange rules but it seems you pay PROPERTY tax for cars and sales tax when you guy it out of state and drive it in.
I know the laws are vastly different from state to state but I'm sure the government is getting their piece one way or the other regardless of whether you buy or lease.
08-05-2011, 11:24 AM
#84
Go Big Blue!
Could you explain that in more detail? In California, your county tax is added each month to the base lease payment to get the total monthly lease payment; it has not been added as a lump sum to the negotiated selling price that is leased.
If you want to buy the car for the residual amount at the end of the lease, tax is then added to this amount at purchase.
Perhaps other states tax the entire amount upfront?
If you want to buy the car for the residual amount at the end of the lease, tax is then added to this amount at purchase.
Perhaps other states tax the entire amount upfront?
08-05-2011, 11:51 AM
#85
You do pay sales tax when you buy a car in CT.
I am not sure what you pay when you move and register a car from out of state.
Every year from day one forward you pay property tax on the car based on the rate of the town you register the car in.
And don't forget we have an income tax here to.
Welcome to CT.
I am not sure what you pay when you move and register a car from out of state.
Every year from day one forward you pay property tax on the car based on the rate of the town you register the car in.
And don't forget we have an income tax here to.
Welcome to CT.
I couldn't believe a person pays no tax in connecticut when buying a car so I had to google it.
http://www.ct.gov/dmv/cwp/view.asp?a=801&q=244520
Very strange rules but it seems you pay PROPERTY tax for cars and sales tax when you guy it out of state and drive it in.
I know the laws are vastly different from state to state but I'm sure the government is getting their piece one way or the other regardless of whether you buy or lease.
http://www.ct.gov/dmv/cwp/view.asp?a=801&q=244520
Very strange rules but it seems you pay PROPERTY tax for cars and sales tax when you guy it out of state and drive it in.
I know the laws are vastly different from state to state but I'm sure the government is getting their piece one way or the other regardless of whether you buy or lease.
08-05-2011, 12:16 PM
#86
I by no means do I think I understand the tax laws of every state. Not even close, but at least here in Florida I can tell you we pay sales tax on the entire monthy lease payment not just the depreciation based on the agreed upon residual percentage. In other words, sales tax is for the "rent" charge and the depreciation.
Also, regarding your issue with tax benefits on lease return. Not exactly sure what you mean by that but here in Florida if you trade in a vehicle AND it has equity THEN that equity can be deducted from the new deal and you do NOT pay any tax on that equity transfer. That seems fair and helps not only the customer but the dealer to entice people to trade into a dealer. if you sold the car yourself then you'd have to pay tax on the sale.
Sounds like Florida is a good place to be
We don't even have an income tax! You guys have to get out of those northern, democratic, union driven, states and come south. I left NJ 20 years ago and wild horses couldn't drag me back there. Although I miss the good pizza
Also, regarding your issue with tax benefits on lease return. Not exactly sure what you mean by that but here in Florida if you trade in a vehicle AND it has equity THEN that equity can be deducted from the new deal and you do NOT pay any tax on that equity transfer. That seems fair and helps not only the customer but the dealer to entice people to trade into a dealer. if you sold the car yourself then you'd have to pay tax on the sale.
Sounds like Florida is a good place to be
We don't even have an income tax! You guys have to get out of those northern, democratic, union driven, states and come south. I left NJ 20 years ago and wild horses couldn't drag me back there. Although I miss the good pizza 1. Pay sales tax on the entire negotiated purchase price of vehicle, regardless of finance method
2. Pay sales tax on the entire negotiated purchase price of vehicle minus the trade-in value of a vehicle traded in, regardless of finance method
3. Pay sales tax only on the negotiated monthly payment of a vehicle, regardless of the finance method; if not financed, same as number 2
From personal experience, VA, DC, and MD all fall into category 2. CA falls into category 3, although VA offers a reduced sales tax rate for cars.
Of course, different states, and even different counties within states, can have additional tax burdens.
In VA, there is a "personal property tax" assessed each year on the market value of the vehicle. If the vehicle is $20k or less, there is a significantly reduced rate or even exemption for this tax. Any vehicle costing greater than $20k is assessed at the full rate based on market value.
And within VA, should you live in Arlington County, they also assess a small "property tax" on the vehicle based on its current market value.
In DC and MD, there are no personal property taxes annually though their sales tax rates are higher than VA for cars.
In CA, unless you buy the car outright with cash, they tax you with each payment that you make on your finance plan or lease.
08-05-2011, 01:54 PM
#87
Financing the residual to buy out the car at lease end will incur interest; that same amount has already uncured interest when you initially leased the vehicle as part of lease/rent fee on the full vehicle value. Hence double interest.
08-05-2011, 01:59 PM
#88
Just to clarify the tax situation, there are a couple of variations on this:
1. Pay sales tax on the entire negotiated purchase price of vehicle, regardless of finance method
2. Pay sales tax on the entire negotiated purchase price of vehicle minus the trade-in value of a vehicle traded in, regardless of finance method
3. Pay sales tax only on the negotiated monthly payment of a vehicle, regardless of the finance method; if not financed, same as number 2
From personal experience, VA, DC, and MD all fall into category 2. CA falls into category 3, although VA offers a reduced sales tax rate for cars.
1. Pay sales tax on the entire negotiated purchase price of vehicle, regardless of finance method
2. Pay sales tax on the entire negotiated purchase price of vehicle minus the trade-in value of a vehicle traded in, regardless of finance method
3. Pay sales tax only on the negotiated monthly payment of a vehicle, regardless of the finance method; if not financed, same as number 2
From personal experience, VA, DC, and MD all fall into category 2. CA falls into category 3, although VA offers a reduced sales tax rate for cars.
08-05-2011, 02:11 PM
#89
I have been getting the itch for a FL beach front house, but the weak dollar is attracting ridiculous competing offers
08-05-2011, 02:20 PM
#90
Go Big Blue!
Yea the housing prices have fallen here a lot. Oversold if you ask me. Now good property is being snapped up fast. I saw a report yesterday showing the migration of people. Top states losing population; NY, NJ, CT, MI, etc. Top three biggest gainers: FL, TX, NC. Hmm, see a pattern?
08-05-2011, 03:10 PM
#91
I can only tell you from my personal experience and I traded in a leased vehicle that had about $1k in equity (gotta love Acura leases and their residuals), which reduced my taxable amount by that same $1k amount. Not sure if rules have changed, but that was in 2008.
08-05-2011, 05:33 PM
#92
Three Wheelin'
You are correct. That's the way it works everywhere I've ever experienced. When you LEASE, whether you pay taxes up front or monthly, you are only paying tax on the lease contract amount NOT the full value of the car. Why? Because you didn't buy the car! It's not yours. You can't be taxed on an asset you don't own. If you buy the car at lease end then you will pay the remaining tax on the negotiated sale price just like if you bought it up front. You are not paying twice.
To add insult to injury, you can only apply the tax toward your next vehicle if you lease from the same leasing company (usually). To add more insult to injury, if you buy the car at the end of the lease you pay sales tax again on the amount you pay for it.
Last edited by jjsC5; 08-05-2011 at 05:41 PM.
The following users liked this post:
SpicyMikey (08-06-2011)
08-05-2011, 09:22 PM
#93
Leasing is based on a few things....
1. Money factor (the rate that the bank is leasing the vehicle)
2. Residual Value (what the car will be worth after the elapsed time of the lease)
3. MSRP (manufacturers suggested retail price)
4. Selling price (what the dealer is selling the car for)
Honda/Acura has some of the best residual (resale) values on the market so that will always be a given, the only 2 variables is the money factor and the selling price. If a manufacturer has a great residual value but their money factors are high, that will raise the lease price. American cars usually have low residuals values so they have very low money factors to compensate and stay competitive.
How does one know what a good money factor is?? Thats easy.....turn your money factor into an interest rate by multiplying it by 2400.
Example: money factor of .00079 (honda crv) x 2400 = 1.896%
That coupled with a high residual value makes a CRV a great car to lease.
The trick is, finding a car that has a low money factor, high residual value, and one that can be had at a huge discount. You would be surprised what you can lease certain cars for.
For example my 2011 TL SHAWD 6MT:
Money factor back then i think was .00071 (1.7%)
Residual is always high on honda/acura
1500 TL to TL loyalty cash
2500 rebate
Coupled with the fact that im in the business and found a dealer to fleet it out to me at 2.5% into Holdback!
My payment is in the 4xx range with not a dollar out of my pocket on a 44k car.
Hopefully this gives you guys a better understanding of it. BTW......BMW and Merc dont have better lease numbers than Japanese cars. They advertise low for their base cars but then they option you to death. Jap cars, esp Acura usually come loaded. That being said .......right now u can lease a mercedes ML with Navi for the same price as an MDX. Why you ask? Because MB cant seem to move MLs so they gave an extra aggressive money factor and a rebate for that specific car!
1. Money factor (the rate that the bank is leasing the vehicle)
2. Residual Value (what the car will be worth after the elapsed time of the lease)
3. MSRP (manufacturers suggested retail price)
4. Selling price (what the dealer is selling the car for)
Honda/Acura has some of the best residual (resale) values on the market so that will always be a given, the only 2 variables is the money factor and the selling price. If a manufacturer has a great residual value but their money factors are high, that will raise the lease price. American cars usually have low residuals values so they have very low money factors to compensate and stay competitive.
How does one know what a good money factor is?? Thats easy.....turn your money factor into an interest rate by multiplying it by 2400.
Example: money factor of .00079 (honda crv) x 2400 = 1.896%
That coupled with a high residual value makes a CRV a great car to lease.
The trick is, finding a car that has a low money factor, high residual value, and one that can be had at a huge discount. You would be surprised what you can lease certain cars for.
For example my 2011 TL SHAWD 6MT:
Money factor back then i think was .00071 (1.7%)
Residual is always high on honda/acura
1500 TL to TL loyalty cash
2500 rebate
Coupled with the fact that im in the business and found a dealer to fleet it out to me at 2.5% into Holdback!
My payment is in the 4xx range with not a dollar out of my pocket on a 44k car.
Hopefully this gives you guys a better understanding of it. BTW......BMW and Merc dont have better lease numbers than Japanese cars. They advertise low for their base cars but then they option you to death. Jap cars, esp Acura usually come loaded. That being said .......right now u can lease a mercedes ML with Navi for the same price as an MDX. Why you ask? Because MB cant seem to move MLs so they gave an extra aggressive money factor and a rebate for that specific car!
08-06-2011, 12:57 PM
#94
Go Big Blue!
In Texas you pay tax on the full price of the vehicle (meaning the "purchase price" of the lease). That is a fact. I explained in an earlier post some ways that you can SOMETIMES get around it. Yes, you can be required to pay tax on something you don't own. BTW, it is better than it used to be in Texas. Up until just a few years ago you paid the full sales tax AND what amounted to a personal property tax because you didn't own it. Yes - I know that sounds crazy but it's true. To get around that many companies set up "smart buys" that were nothing more than leases where you technically owned the car but with a guaranteed buy-back at the end of the term.
To add insult to injury, you can only apply the tax toward your next vehicle if you lease from the same leasing company (usually). To add more insult to injury, if you buy the car at the end of the lease you pay sales tax again on the amount you pay for it.
To add insult to injury, you can only apply the tax toward your next vehicle if you lease from the same leasing company (usually). To add more insult to injury, if you buy the car at the end of the lease you pay sales tax again on the amount you pay for it.
08-06-2011, 01:03 PM
#95
Go Big Blue!
Leasing is based on a few things....
1. Money factor (the rate that the bank is leasing the vehicle)
2. Residual Value (what the car will be worth after the elapsed time of the lease)
3. MSRP (manufacturers suggested retail price)
4. Selling price (what the dealer is selling the car for)
Honda/Acura has some of the best residual (resale) values on the market so that will always be a given, the only 2 variables is the money factor and the selling price. If a manufacturer has a great residual value but their money factors are high, that will raise the lease price. American cars usually have low residuals values so they have very low money factors to compensate and stay competitive.
How does one know what a good money factor is?? Thats easy.....turn your money factor into an interest rate by multiplying it by 2400.
Example: money factor of .00079 (honda crv) x 2400 = 1.896%
That coupled with a high residual value makes a CRV a great car to lease.
The trick is, finding a car that has a low money factor, high residual value, and one that can be had at a huge discount. You would be surprised what you can lease certain cars for.
For example my 2011 TL SHAWD 6MT:
Money factor back then i think was .00071 (1.7%)
Residual is always high on honda/acura
1500 TL to TL loyalty cash
2500 rebate
Coupled with the fact that im in the business and found a dealer to fleet it out to me at 2.5% into Holdback!
My payment is in the 4xx range with not a dollar out of my pocket on a 44k car.
Hopefully this gives you guys a better understanding of it. BTW......BMW and Merc dont have better lease numbers than Japanese cars. They advertise low for their base cars but then they option you to death. Jap cars, esp Acura usually come loaded. That being said .......right now u can lease a mercedes ML with Navi for the same price as an MDX. Why you ask? Because MB cant seem to move MLs so they gave an extra aggressive money factor and a rebate for that specific car!
1. Money factor (the rate that the bank is leasing the vehicle)
2. Residual Value (what the car will be worth after the elapsed time of the lease)
3. MSRP (manufacturers suggested retail price)
4. Selling price (what the dealer is selling the car for)
Honda/Acura has some of the best residual (resale) values on the market so that will always be a given, the only 2 variables is the money factor and the selling price. If a manufacturer has a great residual value but their money factors are high, that will raise the lease price. American cars usually have low residuals values so they have very low money factors to compensate and stay competitive.
How does one know what a good money factor is?? Thats easy.....turn your money factor into an interest rate by multiplying it by 2400.
Example: money factor of .00079 (honda crv) x 2400 = 1.896%
That coupled with a high residual value makes a CRV a great car to lease.
The trick is, finding a car that has a low money factor, high residual value, and one that can be had at a huge discount. You would be surprised what you can lease certain cars for.
For example my 2011 TL SHAWD 6MT:
Money factor back then i think was .00071 (1.7%)
Residual is always high on honda/acura
1500 TL to TL loyalty cash
2500 rebate
Coupled with the fact that im in the business and found a dealer to fleet it out to me at 2.5% into Holdback!
My payment is in the 4xx range with not a dollar out of my pocket on a 44k car.
Hopefully this gives you guys a better understanding of it. BTW......BMW and Merc dont have better lease numbers than Japanese cars. They advertise low for their base cars but then they option you to death. Jap cars, esp Acura usually come loaded. That being said .......right now u can lease a mercedes ML with Navi for the same price as an MDX. Why you ask? Because MB cant seem to move MLs so they gave an extra aggressive money factor and a rebate for that specific car!
08-06-2011, 04:14 PM
#96
Three Wheelin'
Thanks for your vote of confidence.
The following users liked this post:
Acura_Dude (08-07-2011)
Thread
Thread Starter
Forum
Replies
Last Post
08_UA7_Gr33k
Member Cars for Sale
13
02-11-2016 02:17 PM
lanechanger
Member Cars for Sale
4
10-13-2015 10:56 AM
