I’m starting with zero knowledge about lease here. I’ve read through the forums a bit, but I’m not even getting past basic concepts, so please bear with me. I understand that this is a very needy post, but I’d be super grateful if someone could help me understand what is going on here. I cannot find this vehicle anywhere else.
Here’s the deal. I want to buy a new Kia Sportage PHEV but there are very few to be found. I did find one in eastern PA. I live in Illinois. Here’s where I need help:
The dealer is offering the vehicle at sticker, with a $6,812 discount for a lease. He’s suggesting that I can turn around within the month and purchase the vehicle off the lease and keep the discount. I would pay taxes in PA on initiating the lease, but presumably would not pay much in taxes when buying out the least in IL as IL taxes the payments and not the total cost of the lease up front. The lease is through Ally. I don’t know if that means anything.
This is all way over my head, which is a good reason for me to back away. But it sounds like it could be a good deal if it’s legit. First, is what I am talking about doing “a thing”? Do people lease a vehicle and immediately buy out the lease? What questions do I need to ask, and what information do I need to provide for you all to help me? I’d be truly grateful for any assistance you all can provide.
Glad you posted to ask before signing. Make use of the search feature, this same question has been asked a lot in the past few months for EVs, lots of specific examples including Kia.
Taxes are always based on where the person buying or leasing the car lives, not where the originating dealership is.
I would also avail yourself of the search feature - Ally is not well loved.
In general, yes: if you lease a car and incentives are passing through on the lease, they are immediately realized when you sign. If you buy out your lease, you will have to pay the acquisition (when you sign) and the disposition fee (when you buy-out), so factor that into your “savings”. This specific example should not be impacted, but some brands have transition to closed-end leases that cannot be bought out (eg Nissan) so if you switch cars be sure to look into that. Some also have additional fees they assess.
If you do buy out a lease immediately, the dealership will be charged-back. That won’t affect you specifically, but if they are aware of that, they may be less inclined to work with you, or may try to work the deal in their favor other ways.
A lot of people are interested in taking advantage of the tax credits, using a lease, and don’t want to educate themselves on the finer points. This isn’t a coupon you found in a flier, think about this like a job that is going to pay you $7000. Educate yourself accordingly, or peruse the marketplace and consider hiring a broker if you aren’t interested in pocketing every penny (sub-contract the work to a pro). If you do want to learn, keep asking questions.
I have a question regarding this for the state of Texas. I am planning to do a lease and buyout of id4 . My dealer agreed to an OTD price of 39k. As I understood OTD price includes sales tax. My dealer is saying that they are not paying taxes upfront due to tax credits and when I do the buyout I would need to pay the 6.25 % taxes on the buyout amount . Is that accurate ?
Do OTD prices include cost of registration and titling and sales tax i.e. should the 39k OTD include sales tax or is that usually not included in OTD price ?
What you should do here is have them structure the lease with a huge downpayment… basically pay the entire depreciation value of the lease upfront and THEN buy it out… then your sales tax obligation would be only on the now-much-lower buyout price.
So I have an adjusted cap cost of 39000 in my lease. Does that include vehicle registration costs i.e registration + title costs which include the 6.25% sales tax?
My dealer does have tax credits which he is using to offset in the beginning of the lease.
It’ll either be included in the cap cost or will be paid as part of the due at sale.
What you want to do, however, is get your cap cost as low as possible. If they’ll let you put a $20k cap cost reduction down, do it. Then you’d be paying 6.25% sales tax on $19k instead of on $39k. Instant $1250 in your pocket just by paying a chunk of it now instead of in a week.
Ok. I will check with my dealer. Is sales tax usually included with cap cost or is it a false assumption on my part . When you buy out the lease what is the responsibility of lessor. Does the lessor do registration and transfer of title ?
Does this concept (pay huge downpayment and then buy it out to lower sales tax) work even in CA? I read online that CA charges sales tax on the sticker price (MSRP) and does not consider the incentives, rebates, discounts or down payments made.
In general also, I would like to know if CA charges sales tax on the capitalized cost or the MSRP, if I decide to buy out immediately.
Regarding the second point - thanks for confirming that CA taxes only on the “Selling price” or the “Capitalized Cost” and not on the MSRP.
Even though IRA EV Lease incentive ($7500) is taxable, seems like my dealer is rolling that into “Initial Cap. Cost” reducing my sales tax on that, which is good.
Let’s not confuse the selling price and the capitalized cost. While they do sometimes end up equal to the same value, they are different things. The application of incentives is what gets you to the adjusted capitalized cost, and in California, any incentives adjusting the capitalized cost are taxed (as they’re supposed to be in CA).
The only way you would have it not be is if the $7500 doesn’t show up anywhere on the contract and instead is reducing the “Agreed upon value”
Yeah makes sense. By Capitalized Cost, I actually meant Gross Capitalized Cost which is before the incentives are applied and includes the “Agreed upon value”.
Gross cap cost still isn’t necessarily your selling price, as it’ll include any capitalized fees, but if they’re accounting for the incentives in the agreed upon value, you’re good from having to pay sales tax on the incentive.
