So I’m posting here because I’m so confused on this!
I am a resident of New York and leased a new vehicle in New Jersey.
During this transaction, I traded-in a vehicle that was also leased with about 8 months remaining. At the time of the transaction, a vehicle payoff was obtained from the captive finance company (Honda in Holyoke, MA) holding the lease for my trade-in.
The payoff amount did include sales tax (my payoff if I were to purchase the vehicle) and it was $17,139.02.
However, the dealer made the payoff and it was lower than MY payoff as it did NOT include sales tax ($15,851.12). The sales tax was only included if I were to purchase the vehicle.
The captive finance company says the dealer will charge sales tax to the next buyer of my trade-in. The dealer told me my deal would have been short if they didn’t use the higher sales tax figure as it’s required.
I’m not sure this is the case. Since the new lease deal was written around the higher payoff amount, did they pocket that extra $1,287.90?
The trade was valued at $16,799 in the deal vs. the estimated payoff of $17,139.02. I paid them $340.02 in negative equity at signing of my new lease with a different brand.
However, on the contract it shows a trade-in value of $17,139 and payoff of $17,139.
The dealer’s actual payoff to Honda Financial was $15,851.12. because they didn’t have to pay sales tax to them.
If the trade was valued at 16,799 and they paid off 15,851, you should have received 948 of positive equity, not pay them 340. Someone will probably correct me, but I think they did pocket the 1288.
The dealer told me that the deal would have been SHORT if they didn’t use the higher payoff as they’re required to charge it.
Honda Finance said the dealer will charge sales tax to the next buyer of the trade-in.
It all depends on state tax laws I guess, It’s very confusing. It’s like a “double taxation” issue and I’m not sure they’re permitted to use the higher number. Of course, the dealer is going to tell me what benefits them, not me.
Based on what’s in the contract, it was a wash. It does not mean you received a bad deal, just the way they write it on the contract does not always add up. I’ve looked over 3 of my past leases when I learned how the math works and it didn’t make sense to me either.
Thanks for your input. I had the lease terms negotiated ahead of time via email before I set foot in the dealership.
The trade was done completely separate so it wasn’t like that was affecting the payments on the new lease car.
This is why I’m thinking they incorrectly calculated those sales tax costs. When I checked to make sure they made my payoff I saw their payment of the lower amount and that raised a whole bunch of red flags in my mind…
I called the division of taxation this morning and they seemed not to understand what I was telling them. They told me it’s a wash, but I’m not sure that’s the case. Anyone else able to chime in with an answer?
