I ran my numbers via ChatGPT and asked it to use LH forum as a reference. It told me this about large down payments for CA immediate early lease buyout could reduce my taxes. I’m interested in reducing my tax burden if this is true. Here is the ChatGPT output.
“The analysis confirms that a larger down payment yields a proportionally larger, guaranteed tax saving. A $20,000 down payment reduces the total cost by an additional $1,550 compared to the same strategy with zero down. The decision becomes a personal assessment of risk: is the guaranteed saving of $1,550 worth the small, short-term risk of losing the $20,000 in a total-loss event? Given the brief exposure period, for many, this is a rational and financially prudent risk to take.”
This is my first lease ever. I’m basically wanting to buy it out to take advantage of the EV lease credit.
If you total the car in say year 1, you lose all of that. Down Payments do not change depreciation and normally the leasing company has ‘gap’ insurance (Most but Toyota and Mazda) means you lose it all in a total accident.
It’s slightly cheaper in the total payment (at the end)
There are options over a big down payment
One Pay where you pay for the whole lease and save on the interest rate Money Factor (prorated in case of Total loss)
Multiple security deposits where you give them money and at the end they give it back, and you get a lower MF (given back in a total loss)
Gap insurance with your insurance company. If Toyota or Mazda since most others include it for free
First two help the total payment and do not expose you to a $ loss if a total accident occurs.
Last one is in when you lease a car that is totaled and you owe them money.
So just to clarify, a larger down payment would not reduce the tax burden on an immediate lease buyout? Basically 7-10 days later once my lease is in the Finance System, I would request a buyout. I’m not worried about a total loss as the likelihood is slim in that 7-10 days, it’s a risk I’m willing to accept if I can save $1550 in taxes ($20k down payment) from an immediate lease buyout. If this is not true then, no point in putting any money down.
With regards to One Pay, would that help with reducing my total out of pocket cost in the scenario of an immediate lease buyout? I did not inquire about a one pay.
If you are doing an immediate lease buyout, then bigger down payment is useless.
You need enough down payment to cover Tax , Title , License (3000 usually) and then when you buyout, the rest is paid out in Actual value (RV + Lease Depreciation) which is basically the price of the car.
So if you lease a car
Put 3k down , purchased Immediately at 50,000
Put 23k down, purchased Immediately at 30,000
They are the same value (Of course there is 1 month’s interest in there so maybe a few $$ difference)
In California, a large down payment will reduce the tax on the buyout, but increase the tax upfront on the cap cost reduction. There is no net savings. You either pay it at lease signing or you pay it when you buy out.
Every month or so, someone storms in with a ChatGPT / AI analysis, effectively fiction, asking for confirmation. Thank you doing your own research and second-guessing the machine to ask humans with actual experience.
Often the weird ChatGPT responses we see are because the prompt omitted something they should’ve asked, so I will answer the important question you didn’t ask: Unless your mystery car is a Toyota product, there is a 95%+ chance you sound NOT lease to buyout.
It’s a VW ID Buzz and the EV lease credit is really the only advantage. The range on it isn’t great but it looks so cool and the interior space is phenomenal, better than any large suv like Escalade.
You have permission to lease one if you want and drive the snot out of it for 3 years.
But random Internet strangers forbid you from buying an id.buzz lease out. Put $70k in a 50gal drum and light it on fire, at least you’ll be warm for a few minutes.
They are limited but no markups whatsoever. I’m actually getting a $2k dealer discount, $2500 VW rebate, $7500 EV credit. I’ve negotiated from 4 dealers to get $2k off. Just debating on colors.
I’m pretty certain it won’t. This is a YOLO purchase and fits our needs pretty well. The other option is buying a Sienna but I really like the Buzz, enough to consider purchasing it even with its warts.
That’s irrelevant for a YOLO car. It’s their dream car which they’ll own for a long time so it doesn’t matter at all if its value is above or below an arbitrary value (RV) at an arbitrary point in time (3 years).
His other options are very limited
Buy on day one: miss $7,500
Buy used: are there any?
Lease and return: not at that those payments
How? For example let’s say I leased a car that I loved and at the end of 3 year the buyout was 50k and the same vehicles in similar condition are selling for 38k. Id turn in the lease and buy the same vehicle for 12k less. Just because 90% of people are not rational with their money doesn’t mean “it’s irrelevant”.
I’m pretty certain it won’t. This is a YOLO purchase and fits our needs pretty well. The other option is buying a Sienna but I really like the Buzz, enough to consider purchasing it even with its warts.