California Double Taxes? - Zero Drive Off / Capitalized Taxes on Lease

In California, do you end up double paying taxes on the upfront taxes on taxable incentives if you capitalize them into the monthly lease payment instead of paying at drive-off? How about the registration fees?

Eg if they take your entire monthly payment and apply sales tax, then yes they are?

If they effectively double tax, then it would be bad to capitalize except maybe for a gap scenario?

Also does the capitalized taxes get rolled into the residual if you buyout early? (eg you’d have to pay the adjusted residual plus the full amount of capitalized taxes/fees? Or?)

Hmmm that’s interesting are we paying extra taxes on the ~2000 drive off.

I’m hearing the answer is yes, so the effective interest is the sales tax plus mf on rolling in taxes/fees

If I understand the question:

  • if you capitalize the upfront taxes and fees, you are paying a rent charge on that borrowed money
  • in CA, the tax is on the lease payments
  • By virtue of the payment being larger when you roll everything in, you are paying more tax yes (not double-tax per-se, but tax on the additional rent)

I saw you liked an old example I gave:

You’re effectively asking about the $1.64 here, yes?


Yeah this is primarily for EV leases with very large incentives. eg Bolt, i3, Niro EV etc. and low effective monthlies.

Like my last deal, capitalized taxes & fees was more than 1/3 of the monthly payment!

The answer is yes


Take a look at:

Which is @dukez bolt

Right now, cvrp and cvap are not an issue. But yes, there is a button in the calculator to choose to capitalize taxes. If you do, you will pay more rent because of them.

Yes. Not only this, but you’re also paying interest on that amount rolled in and then paying sales tax on the ‘rent’ as well.

Yes the only real advantage to rolling in is for gap reasons, it will cause some double taxation.


Yes. In states where the payment is taxed, you are paying rent/interest on anything you roll-in, and tax on that.

Now if my MF is effectively 1% and my tax rate is 7.75%, not terrible. If I leased an F150 in LA, at 5% MF and 10% interest, you can see how rolling more in becomes more of a burden. Make sense?


Thanks very clear!

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I remember doing this math when I got 2 leases in 2019. In that case I could save around $60 by paying DAS instead of doing 0 DAS. Basically I paid a 3% premium (tax + rent) (~ $2k DAS) to cover for GAP. I ended by rolling up everything into monthly with only first month due at signing and both Audi and MB covered the first payment.

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Yeah if the capitalized taxes and fees are a small portion of the lease then NBD either way.

For a deeply discounted and heavily incentived EV deal, it can add 10% and is a bit more noticeable

That’s why doing the math is important. In my case, it was better to add a GAP for first year from my insurance if the premium was > 5%.

yeah the “insurance premium” for the incremental DAS GAP insurance coverage is (tax rate + MF APY rate) so it just depends what’s the deal there.

can easily be 10%+ in California (8%+2%) and there’s no way the odds of totaling a car is that high…

my collision insurance seems to imply a 1% chance per year. That said it could be important to some people to lower the “deductible” here

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