I’ve reserved a Rav4 Prime XSE w/ PP at MSRP ~$52K before tax - and I’m wondering whether I should put a large down payment on a lease with the intent to buy it out immediately to qualify for WA state’s AFV tax exemption. I’m already thinking to do a lease + immediate buyout since Toyota is offering a $6.5K rebate for leases - but this leaves an open question on whether to add a large down payment (and/or trade in) with it.
WA State has a sales tax exemption for EVs - in which they currently waive sales tax for up to $16K for new vehicles priced <$45K and used vehicles priced <$30K.
I’m over the $45K amount as a new vehicle entering the lease; but I’m wondering how sale tax is treated on lease buyouts.
If put a large down payment and/or trade-in a vehicle to bring the cap cost to under $30K, and then subsequently buy it out - would this be treated as a separate used-vehicle transaction at the new buy-out price? In other words, if it I use a down payment to get my buyout price to under $30K, can I then get the vehicle in scope for the AFV Sales Tax Exemption to save a bit on sales tax?
Sequence of steps:
lease the vehicle
give a down payment to make the value of the car to go lower than 30k (pending formula)
get the car from the dealership
make monthly payment
contact TFS for buyout forms
fill the forms
make payment for buyout option
enjoy the new rav4p
I searched and found a number of reddit threads only - but it only had folks asking this question, but never an answer or follow-up on whether it worked for anyone who tried this. I haven’t seen this answered on this forum or in the official tax exemption FAQ either.
The exemption applies to all or a portion of the total lease payments. If the original lessee purchases the leased vehicle before the expiration date, the exemption also applies to any additional selling price of the leased vehicle if any allowable exemption remains
Not an expert, but I read it to mean that DOR considers a buyout as part of the original lease transaction as far as the exemption is concerned (during the lease term).
Maybe the lease could be transferred to a spouse and the spouse could buy it out (it does say original lessee above)? There could be some risk there - not sure if a spouse would count as a separate lessee (as WA is a community property state) and/or additional fees might apply. Transfer fees would also reduce ROI. So YMMV here.
If you purchase the vehicle after the lease term, I believe DOR will count this as a separate transaction and any applicable exemption will apply; however, unless the legislature extends the program, the exemption expires on July 31, 2025.
Wondering if the $3K in tax savings, is worth the headache of putting $20K down. If you don’t buyout the car after 3 years of lease, you save that $3K in sales tax anyway.
Or alternatively, you could trade in that car after 3 years, and you’ll get a reduction in the sales tax for the trade-in value of the car (assuming thats $30K), even though you are leasing.
Also worth comparing what the interest rate on the lease is vs the interest rate on a potential used car loan. Most likely the lease has a lower interest rate than a used car loan. If you are talking about $50K hard cash - compare it to the 5% interest you can earn on a CD or bond at the moment.
It’s not even $3k in tax savings. The exemption is on $15k at this point, but the sales price has to be under $30k to qualify. So we’re talking closer to $1600 (if in the pricier counties).
The other thing to consider - depending on the lease, you might not even be able to put that much down.
