California 10 day tax exempt For lease buyout

Ask the Hackrs
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55

I spoke to someone from the CA dmv on the phone. They have a call back system so pretty convenient vs waiting on hold.

Anyways I asked about using the title from the leasing company to sell the car vs getting the title in your name and he said it was perfectly fine to use the title from the leasing company. No need to go thru getting a new title and using the cdtfa form.

So I am confused. Are some on this thread saying that dealers won’t accept the title from lease company? If so this contradicts what the dmv told me…

I am waiting for my title from ally and plan to sell to vroom or carmax or a private party…but don’t want a any surprises

56

This is requirement of the third party buyer. They probably had issues in the past which is why their policy is that way. Either find another buyer or get title in your name. Best confirm what the buyer’s policy is.

57

Private party won’t work AFAIK. The next buyer could face a nightmare trying to register and title the car since Ally’s title will have your name as the buyer.

Whether Vroom or Carmax etc accept Ally’s title is up to them.

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58

I asked about this specific use case to the dmv expert and he said there is no issue with private party. Just sign the title over within 10 days.

I guess we will find out when I do this. Strange we can’t get a clear answer on this.

Btw here are some things i found online:

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59

I just read the pdf form of CDTFA 106. At the bottom of the form where you are supposed to mention the reason for the request on use tax clearance, the statement is like this

“I hereby request a Certificate of Use Tax Clearance to allow completion of registration at DMV/HCD without payment of the California use tax for the following reason:”

My interpretation is that you need to go through this only if you are planning to go to DMV and register the car in your name without paying tax. I suppose that’s a long process to wait again for the new title.

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60

I just sold my Alfa Romeo to shift. They took the title from Ally without any issue. It was a month long process. Was very risky but thankfully market didn’t change much during this time. I took personal loan to do the lease buyout. Here is the timeline so it will be helfpul for someone. It all started when I attempted to sell to Autonation and they got a payoff quote of 10k more than my personal lease payoff from Ally. It was close to my lease end and I decided to go through below route.

6/8 Tue - Applied for personal loan from SoFI
6/11 Fri - Cash available in my bank from SoFi.
6/12 Sat - Prepared Cashier’s check and send to Ally through usps
6/16 Wed - USPS tracking says item delivered. Checked with Ally next day, but they said it takes a while to process the postal mails
6/22 Mon - Ally online account shows payment has been applied. Talked to customer care again on next steps. They said they will send a FedEx for me to sign and send back (Bill of sale and odo reading statement). Followed up again in coming days, but no update
6/28 Mon - Received call from their buyout dept and said they will send me the docusign for bill of sale and odo reading(No FedEx). I signed through docusign the same day
6/29 Tue - Ally rep signed the document and I received the final doc through email. I specifically requested the person to send the title through FedEx
6/30 Wed - Ally sent the title
7/01 Fri - Received title through FedEx
7/01 Fri - Received a new quote from Shift. I called customer service and ensured they can take the title. Arranged appointment same day. Somebody came in the evening, inspected the car and drove if off.
7/05 Mon - Car listed in their website
7/06 Tue - Money available in my account.

Expenses
Had to renew the registration on June-15. Shouldn’t have waited till lease end. Paid ~$500
Insurance for the above period - ~$50
Interest on personal loan for a month - ~$300 (but SoFi had a bonus offer to give $300 on approved personal loans. So this may be covered).
My best case profit is nearly 2k.

If anyone wants to use my referral link to go through similar route from SoFi with $300 bonus, PM me.
Anyways, the delay it can take and how the market will change is unpredictable. So, it’s good to think of all backup options. Use your own math and judgement to make sure it can work out for your case.

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61

I found out after I submitted my cashiers check to Ally that they have a fedex only address for expedited processing. Of course they didn’t tell me that when I called and asked for expedited and no where is it listed on the site, so I am stuck with the 7-10 business day processing at their po box :frowning: Will be happy when I get the title and will be done with ally.

Nice that they did a docusign.

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62

I see. In your Ally online account, there is a chat option, I was following up with them through that mostly. It was less painful than dealing through phone. Once your payment is applied, they say it takes only 2-3 business days for the next step(docusign). But, mine was a full week. They gave me the number for the buyout dept to check , but it never got connected. And again, when the buyout dept person called me, she read my name on check wrong and assumed it was from a third party and was telling me she will send back the check. Probably that could have delayed. Anyways, she realized the mistake and went ahead.

63

Did you pay tax on the buyout?

64

No. The buyout quote from Ally doesn’t include tax. You are supposed to pay tax only when you visit DMV to transfer title. For this sale, I sold it to Shift with the original title itself, that too within the 10 days period.

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65

Question for you guys I’m positive my Mercedes payoff doesn’t include Cali tax, but I’m selling it to a Private Party. Since I will get the title first am I exempt from the sales tax portion since he will be registering the car?

66

Charlieo answers this exact question in an earlier comment in this thread - California 10 day tax exempt For lease buyout - #58 by Charlieo

So, the answer is No. you don’t have to pay sales tax if you do the transfer in 10 days. I think, it’s a good idea that you and the buyer visit DMV together and ensure all happen smoothly once you have the title in hand.

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67

@socalguy - did Shift say the transaction had to be done within 10 days of the date of sale listed on the title from Ally? Or did that not matter to them as a dealer? My experience getting the title from Ally took much longer than yours (I didn’t receive the title until well after 10 days from the date of sale), so wondering if they (or other dealers you investigated) said anything about it having to be done in the 10 day window. Hoping to avoid the whole exemption hassle.

68

No. I did not specifically ask them this question. My guess is that it doesn’t matter since they are a dealer.
By the way, I had a call with CDTFA office in May before proceeding with buyout. They said the rule says 10 day period kicks in when you ‘acquire the title from lessor.’ The officer interpreted it as starting from the day you receive it. So postal delay doesn’t matter if that’s the case. However I think it’s safe for you to have a proof that you received title on what date. If you have USPS informed delivery notification, that’s helpful.

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69

Keep in mind that the sales tax issue is between you and CA and pertains to your purchase from Ally.

Shift or whomever purchases the car from you after that has no say or involvement in what tax you pay. If you ask them about this, all they’re going to do is look at you funny.

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71

I just finished this insane CA lease buyout sale process for my 2020 Volvo XC90, and because this forum has been so helpful to me in navigating it, I also thought I would share a timeline.

tl;dr - Vroom overpromised multiple times they could do this transaction, and they ultimately could not; CDTFA gave me a run around for weeks and ultimately denied my tax clearance application because of the 10 day rule; I ended up selling to My Car Auction which offered a decent price and could accept the lessor released title. My takeaway: find a dealer (online or in person) who can do the lease buyout directly or accept a lessor released title, otherwise you’re likely in for weeks of stress. This process has been awful, and I don’t wish it on my worst enemy.

5/23 Sun - Received an offer of $49,176 from Vroom for my Volvo; agent confirmed they could do a Volvo lease buyout (Carvana said they cannot work with Volvo and offered less anyway)

6/1 Tues - Called Vroom to check on buyout status; agent indicated their acquisitions team could not facilitate the lease buyout with Volvo and closed the account; agent indicated they would be able to purchase at the original offer price if I bought out the lease myself

6/1 Tues - Obtained a cashier’s check and overnighted to Volvo for lease buyout

6/4 Fri - Volvo online account showed status as paid; Volvo recorded 6/4 as “date of purchase”

6/11 Fri - Received an “odometer disclosure statement” in the mail from Volvo requiring me to sign and fax back to Volvo (wow, a week delay and we’re using fax for this??)

6/11 Fri - Faxed odometer disclosure statement to Volvo

6/18 Fri - Volvo signed the title releasing their interest in the vehicle and processed the title for mailing

6/25 Fri - Received the lessor released title (dated 6/18) and bill of sale (dated 6/4) in the mail from Volvo; lessor released title names “VCFS Auto Leasing Co” as well as myself and my wife; VCFS has signed away their interest in the vehicle on the title

6/25 Fri - Uploaded lessor released title to Vroom; called Vroom buying agent who confirmed receipt of title and said contracting should be in touch

6/28 Mon - No word from Vroom on the 10th day since title received - feeling nervous about the 10 day rule; applied online for a use tax clearance certificate (CDTFA-111), submitted supporting documents (scanned copies of lessor released title, Volvo buyout offer, cashier’s check, proof of intent to sell vehicle through advertisements and Vroom correspondence) and received a CDTFA confirmation number

7/2 Fri - Called the Oakland CDTFA office to check on clearance certificate status; receptionist provided the number to an agent; called the agent three times with no pickup; left agent a message on 4th try (no call back)

7/2 Fri - Called Vroom to check on contract status; agent indicated contracting team closed the account without any notation; agent was confused and reopened the account and resubmitted documents, indicating contracting should be in touch within 2-3 business days

7/4 Sun - An online CDTFA agent emailed about the tax clearance certificates and indicated “I am not understanding your request” and instructed me to read “Pub 52 which I have disclosed the link below and if you still feel that you qualify for a clearance please send in the appropriate documents.”

7/5 Mon - Emailed CDTFA agent pointing to relevant CDTFA website indicating tax clearance eligibility for “Transfer of a Vehicle to Lessee by Lessor for Purposes of Resale” and pointed out that all documents have been submitted online

7/8 Thur - CDTFA agent requested bill of sale from Volvo; replied to email indicating I was travelling but would send over the weekend

7/9 Fri - Called Vroom to check on contract status; agent said account was closed again by contracting, transferred me to contracting agent; contracting agent indicated that Vroom cannot acquire the vehicle without a fresh title with only my name and that the title must be held in my name for a minimum of 14 days before they can issue the contract; contracting agent did not know why acquisitions team has this policy and cannot accept the lessor released title

7/11 Sun - Emailed CDTFA agent with Volvo bill of sale

7/15 Thur - CDTFA agent said they need the bill of sale from my contract with a buyer; I indicated that in order for me to sell to a private buyer, I needed the tax clearance certificate first to get a fresh title and not pay sales tax, after which I will contract with a buyer

7/16 Fri - CDTFA denied my tax clearance request indicating: “2. Seller purchased leased vehicle, 2020 Volvo XC90, on 06/04/2021. 3. See attachment, received email from Seller dated 07/15/2021 stating he has not resold the vehicle and current location of the vehicle is his home address. 4. Test period expires on 06/14/2021 due to the applicable regulation. 5. Request for a tax clearance denied. Seller is still in procession of the 2020 Volvo XC90 41 days after buying out the lease and have not resold the vehicle within the 10 day test period.”

7/16 Fri - I relisted the Volvo on Craigslist for $48,500; received a call from www.mycarauction.com who said they can purchase the car with the lessor released title for $47,000

7/17 Sat - My Car Auction buying agent came to my house, inspected the car, cut me a company check for $47,000 and scheduled a vehicle pickup; my wife and I signed a title transfer form and I signed the lessor released title releasing our interest in the vehicle

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72

I don’t understand, so you didn’t have to go thru the CDTFA? or because it was beyond 10 days you had to pay the sales tax?

73

Because taxes are triggered when you go to the DMV and apply for a new title, you don’t have to go through CDTFA if you sell to a dealer that is able to accept the lessor released title. The problem (which I learned the hard way) is that many of the online dealers (Vroom, Carvana, etc.) will not process the lessor released title and will require you to go to the DMV for a fresh title, despite what front line salespeople might tell you (the acquisitions team at those online companies are the folks behind the curtain making the decisions). In my case, My Car Auction had no problem taking the lessor released title. When I told them I was having trouble with CDTFA, they looked at me funny and said, “you don’t owe sales tax on cars you buy in order to sell.” Well, if you’re a dealer, yes, but for us individual consumers, it’s more complicated. But finding a dealer who can take the lessor released title means no trip to the DMV, no new title, no tax collection. I was attempting to get a CDTFA tax clearance so I could get a fresh title and sell to Vroom or an individual buyer, but finding My Car Auction solved my problem.

I suppose it’s possible someone at the DMV takes a close look at the lessor released title and sees that Volvo signed it in June and I signed it in July, but the odometer mileage didn’t change and dealers are allowed to hold on to cars while they wait to sell them.

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74

Dude you are a life send. I was in my way home from CarMax miffed because they want the title without the lease company so I canceled the appraisal. Then I read your post and my car auction will match the carmax quote which is about $1k more than their quote so I am back at CarMax getting a fresh offer. Talk about hoops. I won’t celebrate until I have the money in the bank. Leasehackr ftw on buying and selling

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75

OMG, reading your timeline feels like watching an episode. Glad to see that you finally sell your car w/o paying tax. What a highly stressed process!