Hi everyone, I’m helping out my cousin who is considering buying out the lease on her '18 Toyota RAV 4 XLE Hybrid. Toyota FS requires that you go to dealer to complete the buyout. Her originating dealer sees her as an easy mark, so they tried to rip her off, luckily she called me and walked out of there. So now I’m looking for another dealer to complete the buyout in No VA (she’s in Herndon, VA). 1 of the dealers told me that she’s better off going back to the originating dealer because then she wouldn’t have to pay tax again, where as if she bought it out through them, they’d have to charge tax. This sounds insane to me. I’m in NJ so I have no clue as to the rules in VA (I know they pay sales tax and on top of that they have to pay annual property tax as well). Thanks for shedding light on this subject.
Yep. Heard the same from my Volvo dealer. Some crazy VA law.
Not sure why. She buys it from TFS at her payoff, not from the dealer.
Sounds like the state is trying to force folks to go back to their originating dealer. The statement I heard is that yes, the buyout amount is the same, but the non originating dealer will need to levy tax which the originating dealer will not have to, therefore costing her more money if she doesn’t go back to the originating dealer. The work around may be to execute the buyout at a non VA dealership, I’m waiting to hear back from a dealer in MD.
You said her originating dealer sees her as an easy target. How? There is no way around it, she still has to pay VA tax.
petite, meek, Asian woman. They almost got her to buy it and add on several thousand dollars worth of added “protection” that wasn’t necessary. on top of that they said her “annual inspection” expired and needed to be done right then and charged her $200. How is annual inspection not on the anniversary of the purchase date (which was 2+ months away from when they pulled this stunt). they had all the paperwork done and she would’ve signed it if she hadn’t paused and called me first.
This applies to any dealer she goes to. Inspection is done when dealer gets the car, not when she buys it. Besides, it’s $16 only.
In VA, tax is added on total “sale” price at time of lease. It was either paid upfront or added to capitalized cost. Does not need to be paid again. That is why in VA the dealer payoff and my payoff is the same, no extra tax to pay.
But you must go through the original dealer to avoid paying tax again.
Exactly! That was totally bogus, but she didn’t know any better & let them get away with it.
So, why does VA make you pay the sales tax again, if you buy it out from a dealer other than the originating dealer? If it was already paid up front as part of the lease, why does it matter where you buy it out again? Doesn’t the state have a record of the up front tax payment? What you’re saying is that she will get penalized with paying the tax again if she gets it from anyone besides the originating dealer?
Don’t ask me. This doesn’t make any sense.
That is a good question whether a dealership in another state would allow you to do this without paying tax on the purchase. But remember, even if they say they can do it the VA DMV has the final say. To me, it’s a risk not worth taking especially because the DMV here is still by appointment only so if something goes wrong with DMV it is a PITA to fix (I know this from recent experience)
My advice is that in the end it will be easier to just go with your cousin to the dealer/talk her through it on the phone. They literally can’t say no. You have a buy out amount on lease they have to honor. I would get financing squared away before hand from your bank in case dealerships offer isn’t competitive.
As for the 200 dollar inspection, after I get everything done I’d email the GM and ask for the money back maybe with the carrot of not going negative on social media and naming names for this unethical behavior. I’d guess the paperwork shows that that’s not for the State Inspection since overcharging on that is beyond the pale stupid/illegal.
Yup, I’ll clear my calendar to drive down (I live in Princeton, NJ) and make sure this goes off without any hitches. She’ll need a Toyota Extended Warranty since the B2B warranty will end when the lease ends. This will be another opportunity for the dealer to try to rip her off again. I’ll see if I can get the Toyota warranty from another dealer just to make sure we have a backup in case they start to play games. Good thing we still have a few weeks before I have to deal with this.
She can probably buy the extended warranty directly from TFS. Subaru offered it to me at a more than reasonable price.
Unfortunately, the Dealer is correct. Accoding to VA code § 58.1-2403(25) - Motor Vehicle Sales and Use Tax (MVSUT) is normally collected when titling the vehicle in the lessee’s name; however, if the lessee is the original person who paid Sales and Use Tax (SUT) on behalf of the lessor he may be exempt from paying it again. The lessee must present proof that the payment was made. Additionally, the vehicle must be either acquired directly from the lessor or from the selling dealer who leased the vehicle to the lessee initially. Purchases made through another dealer will disqualify the lessee from receiving the exemption from Motor Vehicle Sales and Use Tax (MVSUT). The title must include an individual named on the lease. The lease must be to a person or persons, and it shall not include any commercial entity as a lessee.
Can you maybe explain the logic behind this? I paid the tax to the state. How does going through a different dealer change that?
Honestly - I have no idea.
My best guess is to collect tax on people buying out a lease where they paid the full sales price tax in a different state - like Maryland.
From some internet forums it looks like you can/have to buy an extended warranty at a Toyota dealership before the 3/36 warranty expires, although it’s unclear if it has to be done in the state you live in. OP - I’d do a little research on what a good price for the warranty you want is and then call a few Toyota dealership and get quotes. Toyotanation.com is a good starting point for that research. Fortunately there are 10+ dealerships in NoVa so you shouldn’t have a problem getting one to agree to a fair price.
Not sure I understand. VA tax is collected and paid to VA no matter where you buy. So, as a VA resident, I’ve paid the 4.15% tax on the full price already, even if I bought in MD where they charge their residents 6%. Don’t understand why the state tax is tied to the dealer.
This is why IANAL — I’m not even seeing the second part mentioned in the statute:
https://law.lis.virginia.gov/vacode/title58.1/chapter24/section58.1-2403/
The first part is there:
- Sold by a vehicle’s lessor to its lessee upon the expiration of the term of the vehicle’s lease, if the lessee is a natural person and this natural person has paid the tax levied pursuant to this chapter with respect to the vehicle when he leased it from the lessor, and if the lessee presents an original copy of the lease upon request of the Department of Motor Vehicles or other evidence that the sales tax has been paid to the Commonwealth by the lessee purchasing the vehicle;
(You can also view the various revisions, eg the latest to this was in 2019: Bill Tracking - 2019 session > Legislation)
This I am not finding. The last part about the title being in a named individual is some interpretation of the rest of exemptions and interpretation from elsewhere. I am not finding anything that the transaction has to be at the originating dealership (not that it isn’t elsewhere, it’s not in exemptions).
I miss a lot about living in Virginia, definitely not this. Not one bit.