I leased a 2019 Volvo XC90 in November 2018 and after some discussions with a family member, they actually wish to buy it. The pay-off amount and the actual value of the car are quite close so we both want to do it. However, I live in Georgia, who loves taxing titles. I called VCFS and they were so friendly telling me that they don’t do third-party buyouts and that upon payoff would release the title to me.
I would like to avoid that tax since if it hits it’s in nobody’s best interest to do the deal. Has anyone ever done something like this in Georgia and avoided this tax nightmare?
FWIW - I did check the state legislature’s bills… doesn’t look like they’re going to make any attempt to stop screwing people this session.
For those of you outside of Georgia wondering what this is about. Georgia charges a 7% tax on the state’s determined fair market value of your vehicle upon titling it. Anytime the title changes hands the tax is owed. Upon paying off the lease the vehicle’s title would change to me, incurring a tax. Estimated to be about $3600.
So you don’t want your XC90 anymore, can’t swap the lease, but don’t want to pay your states taxes? Not a lot of options unless you want to move to a different state with lower taxes. Are you sure the payoff amount and value are close, after 4 months of leasing that is surprising. If it is, then you selling the vehicle, and your family member getting a similar deal on another XC90 would work out cheaper.
If you never paid tax on the remaining value, then it would be reasonable to expect you to owe it if you bought it out. Similarly, if the family member bought a car anywhere, they would owe tax on it as well. I don’t see any screwing going on, it would be like that in any state with sales tax.
I’d love to buy a car and skip the sales tax… that’s not really the case here as you imply.
Read the original post again. The simplified ask is, how do I accomplish a third-party buy-out without doing a third-party buy-out? The answer is most likely, I can’t.
I don’t care one way or the other. If didn’t have the XC90 I’d probably grab another V90 (I have one of those as well). She wants to buy, not lease although I didn’t ask her specifically about that). I don’t want to pay taxes on a car I will not register in the State of Georgia.
Correct, I only paid on the sum of the lease payments and I’m damn positive Georgia doesn’t offer that up as a credit, that would be too kind. She will have to pay taxes in her state which she knows and accepts.
In this case Georgia is going to tax a vehicle that will not be registered in the State of Georgia. It’s just the act of the title hitting me first triggers the tax on the full value of the car, not the remaining value… the full current value, which seems… not right.
I assume if my family member lived in Georgia… it would probably go something like this:
I buy out the lease, pay 7% of the value.
I sell her the car, she pays 7% of the value.
Georgia smiles after having taxed the same car, twice, for the same value, in the same day.
Where does your family live? Some states allow transfer of vehicles for nominal value without tax penalty.
It also seems weird Volvo doesn’t allow third party payoffs. Does this mean they no longer allow you to sell to CarMax? I know people on this site have sold Volvo’s to CarMax so not being able to do that anymore is a big change.
I think a dealer can buy it out, but not an individual. Best bet would be to see if you can sell it to Vroom or Carvana and have the family member buy one in their state. I don’t see a way around the state tax.
They’re in Michigan. Since I am in Georgia I will still be hit by it, don’t think there is a way around that.
I’m not sure about the Carmax part. However… I’m not looking to get rid of it because I don’t want it. I pamper the hell out of my cars and thus they’re extremely popular in my family to buy. I really never figured this would happen with this car, I really only leased it as a toy and to keep the miles off my V90.
I’m not either. The only backdoor I could see is possibly she takes over the lease and then buys it out… if Volvo would even allow that. I did about the only thing I think I can do. I wrote my state representative and senator to complain lol
Michigan isn’t the problem. Georgia charges a 7% tax on the value of a car when the title changes hands. Buying out the lease triggers that. I will be required to submit the tax payment no more than 30 days after the title application is applied for from the leasing company to assign it to me.
Georgia does it to but the buy-out is me buying it from the finance company. That transaction triggers the tax. The transfer after that would be me selling it to her. That part is not taxed. I don’t want to pay tax to sell it, that’s what I was asking above.
This circles back to my first point, you want to buy the car without paying the full tax. Not wanting to pay the tax twice is reasonable (once on buy out and once when you transfer it). But Michigan allows you to avoid that double taxation with a transfer to family. Your lease covers the tax payments for the percentage of the car not included in the residual. You still have to pay the tax on the residual value. You seem to be asking the state to forgive the tax on the residual cause you don’t want to pay it. I get you are transferring it but if that was the rule then at my lease end I would buy out the car and transfer it to my wife to avoid paying taxes.
So it seems to me like your view is there shouldn’t be a tax on residual of leaaea cars. That’s something for your state rep/senator.
I don’t believe OP mentioned which family member this is, so I would assume it is not an immediate family member. In that case, it would be best to contact an attorney or at least browse some legal forums. I’m sure there is a loophole of some kind.
There’s no way out of this. You have to buy it first before you can sell it to anyone (even a family member) since it doesn’t belong to you till you buy it. That means you have to pay sales tax on the purchase. This is one of the hidden “gotchas” of leasing and applies to most if not all states that charge sales tax.
Maybe this relates to my work in government and understanding the unfortunate need for taxes/how everyone wants small government except when it comes to their benefits. But this isn’t a gotcha situation. When you lease you are renting a portion of the car you down own the car.
You cannot do with it as you wish (i.e. Turo) and a benefit of this is most states only make you pay taxes on the part of the car you use. It’s a square deal.
If you want the rest of the car, you have to buy it and that includes paying taxes on it. I don’t like paying taxes any more than the next man but I don’t see a policy argument for leasing being a way around having to pay taxes on the RV of the car.
Not sure if there’s a difference in lease vs. purchase but when I purchase the title is already in my name and has the lien holder on it. When I paid off the car, the title which was held by the lien holder is sent to me with their stamp on it. I then sign that title over to the buyer. I would think when you lease you don’t have to title it to yourself again to sell.
