So my 2007 Civic lease is coming to an end. The buyout is $12,7xx. Currently I’m about 6000 miles over, Honda Finance says we can settle at paying $600 in fees if I bring it back.

Right now I’m considering buying a used 05/06 RL. I was told from Honda Finance that if I refinanced through another company I would have to pay sales tax, however if I continued my financing under my current plan I can just finance and not pay tax. To my understanding if I took this option than I can use my car as a trade and save $1500 ($600 in over charges and $900 in tax), two dealers have told me though that if I bring the car in it will not credit me tax!

That doesn’t make sense because to me it’s just like me bringing in a trade? If I have a 13K trade and the car I was is 20K, I should only pay tax on the 7K difference. This is in the state of Illinois.

Right now I’m thinking of the RL or possibly leasing a Passat CC / 4G TL. In the end I think owning the RL would be the best bet, but we’ll see if I can some dealers to take my offers while paying the asking price on the civic.

 

whatever you pay this year in tax for a new car you can credit to next year's tax returns... I believe it applies to all car brand purchases...

 

RLs are crazy cheap now

 

The tax credit can only be used for vehicles that haven't been registered. If you're buying a used RL, you won't qualify.

In regards to the tax situation, I don't know how you'd avoid it. In a lease, you're taxed on the portion in which you finance. So if you plan on buying the car at lease end, I suspect you would be taxed again. It's like buying a used car.

 

^^ Oh didnt notice the "used" part... whoops

 

One more footnote. The only way you'll make money in a trade is if they offer you more than $13k for the Civic. I'm guessing you're planning to finance the $13k needed to buy out the Civic at lease end. Hate to tell you, but that means you owe $13k which equals zero equity.

In otherwords, if you trade in a car in which you owe money, all that they do is tack on what you owe to the car you want to purchase:

$13k Civic - $13k you finance to buy Civic = Zero equity = Zero Trade

Why? Because the Civic needs to be paid off. The only way your scenario would work, is if they offer more than $13k for your trade.

For example, if they offer say $14k, you would net $1k which can be used towards the new car.

$14k trade offer - $13k you owe for Civic = $1k left for new purchase

 

I thought that the taxes didn't have anything to do with the payoff on the car.

The car still has a value ... It just also has a lien on it.

So if the RL is $28,000 and they give him $13,000 for it, then his sales tax should be calculated on the $15,000 difference ... I think.

It's just in the details of financing that the payoff amount becomes relevant.

Again, this is all based on a correct recollection of my last purchase in July 08.

 

Yes, the civic still has value. But like you said, there's still a lien on it. So if the dealer gives him $13k, it pays off the Civic, but he's back at zero. In other words, nothing goes towards the price of the RL.

 

Ok, I think I understand why Honda Finance said you wouldn't have to pay taxes. Of course it totally depends on your state.

Anyhow, you wouldn't have to pay taxes again if you take out a loan through Honda because they already have the title and you wouldn't have to re-register the car (typically when taxes are collected). Voila. If you use outside financing, the new bank would in turn pay for the Civic, transfer the title. In essence, you'd be buying a used car and hence, be taxed. I think.

 

https://acurazine.com/forums/car-talk-5/i-just-picked-up-rl-722749/

I don't think the tax rules are different in IL than in other states, but if you purchase a car off a lease, you will have to pay tax on it, so I don't know who told you what you are thinking, if they knew what they are talking about.

 

You are correct.

When asking for the payoff quote, they usually tell you if it's including tax or not (if they don't just ask). As far as I know, regardless of what state it's in, if you are paying off a leased vehicle with intent to buy it, you will pay tax on the payoff amount. When leasing a vehicle, you're only paying tax on either the usage, the depreciation or the monthly payment. Once you payoff that car, even though it's been already registered, Honda will still ask for you to pay the tax because they have to report the transaction to the DMV and pay them the sales tax.

 

It depends on a lot of different things, one of which if you're making a decent salary, you most probably won't qualify for it. It's more designed for the "less fortunate". Change. Isn't that what you all wanted?

 

And last thing, FWIW, I looked at a 2007 Civic LX trade tonight with 23k miles on it, wholesale value on the car with that mileage was about $11,000, which is what I offered the customer.

 

Thanks! All I was looking for was the savings in tax. I know I'll have zero equity, I didn't plan on making anything on the Civic, if anything I was planning on taking a hit. I can give up at least $600 on the resale and still make out if I don't have to pay the extra in Tax. I'm hoping this will weigh in well with the Acura dealers when I can put some extra margin into their pockets if they save me some in taxes.

We'll see where this all ends up. If everything goes to plan I get a 06 RL with Tech for around $23K after TTL. That is a pretty sweet deal for me considering when I first bought my TSX I sat in a 05 RL and just though "Man this car would be nice to own"