Just wondering why don’t any brokers advertise for Maryland on this forum? I’ve always wanted to do a lease but I’m super confused by the tax situation here and how it’s calculated. I assume it can be rolled into the lease payment, but how do incentives and discounts work? Let’s say the MSRP is 50k and it’s 10% off, plus $3k in incentives, does that mean I’m paying taxes on 42k? With 6% sales tax that’s $2520, or I guess an additional $70/mo on the lease. Are other states like that? It seems to me that leasing in Maryland is kind of stupid and expensive, or maybe I’m missing something.
I changed your tag to MD. click on it and you will see lease brokers that will work with you. You’ll pay sales tax on the full purchase price and all incentives. Maryland taxation on leases is worse than anywhere except City of Chicago. VA at least has a lower tax rate and TX has lease tax credits available. Most states tax the monthly payment. Anything can be rolled into the monthly payment aside from MSD
Not sure about tax on incentives in MD, so he may be paying sales tax on $42K. In VA it is on the full sales price minus all incentives and incentives are untaxed.
Online it’s saying “Maryland taxes vehicle purchases before rebates or incentives are applied to the price“ so it seems that they are taxed. Thankful I don’t live in Maryland (not that I’d see a reason to considering Virginia is superior in every manner)
Then it sucks even more. But they don’t have property tax, I think. So it’s a wash with VA
Thanks! Weird I was searching for the MD tag and it wasn’t coming up. I guess leasing just isn’t for me in MD then, that really sucks. What a total rip-off. Anyway in Maryland we deal with speed trap cameras everywhere, but in VA they deal with cops breathing down their necks looking for any opportunity to throw you in jail or hit you with a misdemeanor for speeding.
Huh? Driving under 15 mph over speed limit doesn’t get anyone arrested or even stopped.
Unless you exceed the very dangerous speed of 80 mph.
- 6% tax
There are other upfront tax states like TX (6.25), VA (4.15), NJ (6.625). MD is 6%. It sucks as bad as the Redskins.
It is a huge pain - but there is a (tarnished) silver lining: yes, you pay sales tax on the full purchase price in MD before any rebates, in your case $2,520 tax on a $42k sale, but at the end of the lease, things can be slightly better.
Say your residual value is 50%: 50% * $50k MSRP = $25k. If you buy the vehicle at lease-end for the $25k residual value, you pay no sales tax - you’ve already paid it. You don’t want to overpay for your vehicle; if the residual value is higher than the current market value (very common), then don’t do this, just buy it for cheaper elsewhere. But if the residual value is competitive to market prices, then good: buy it, now the vehicle is yours, and it can be kept, sold, or traded in later on a future purchase or lease.
Now, if you return the lease to the dealer and at the same time lease or buy another vehicle FROM THE SAME DEALER, your lease-end residual value will function as a sales tax credit against the new lease or purchase. The residual value acts like a trade-in vehicle, even though you technically don’t own it.
So for a $25k lease-end residual, that’s $1,500 of sales tax credited against the tax due on your next purchase or lease - worth a $40-60 reduction in your next lease payment. Basically, it’s as though you bought the vehicle at the residual, then instantly sold it back to the dealer as a trade-in, and received exactly the same $$ amount for trading it in as you just spent to buy it. So it nets to a $0 transaction for you, the buyer, but now you can use the sales tax credit.
Once you’re in the lease game, you get to “roll” the sales tax credit each time you get a new lease, paying only the difference between trade-in and new vehicle sales price. Good luck trying to switch car brands, though. You’d have to find a very generous dealer group that owned multiple care brands under one legal entity, who would accept your lease return under one brand and allow you to purchase a different-branded vehicle. Per the tax law statute, it’s possible, but most dealers will stare at you blankly if you try this option.
Is there 80 mph speed limit anywhere in NoVa?
The highest in VA is 70 mph. I was never stopped going 80.
There are two types of upfront taxes.
NY and NJ, for example, tax your total lease cost. That is generally lower than taxing your sales price, which TX, VA and MD do…even more so if you get a really good deal on your lease.
And here is where VA sucks again. There is not tax credit.
Hey thanks for this really awesome and informative response, this should be stickied for anyone searching about leasing in MD.
I’ve got a question though - when you purchase the car at the end of the lease, I’m paying sales tax on it again? The lease credit afterward for trading it back in really just covers the tax I just paid on buying it at the end of the lease. So it seems like it really only works if the residual is so good that the market value is higher than the residual price + tax? And if that’s the case I might as well not trade it back to that dealer and go sell it elsewhere for a profit.
If you leased the car in Maryland, you pay sales tax up front - no paying sales tax again at purchase at the end of the lease. Now the sales tax may be “capped”, meaning the cost is spread over the lease payments, but it has been “paid” to MD upon signing the lease. If you import into MD a car leased elsewhere, (I got a car off Swapalease from NJ, a couple years back), when you register it at the MVA, you pay the difference between NJ tax and Maryland tax. There should be no tax to purchase at end of lease in MD.
I’m not saying that there is.
I’m just saying that I’ve driven on I-64 and I think speeds in excess of 80 are safe. But since I don’t want to get a reckless driving charge I keep it to 79.
Yep I agree, the speed limits and how they’re enforced on 4 lane commuter highways in VA are there as a targeted money grab. There are back roads near my parents house in NOVA that the speed limit is 60, which is usually faster than I even feel comfortable driving them. I hop onto I-64 and the limit drops to 55. You hit 75 on one and it’s a misdemeanor wreckless driving charge, they can and will take you to jail for not much higher than 20 over on roads where it’s perfectly safe to do it.
Thank you for clearing that up! Are you a Maryland resident so you know for sure that’s how it works? It sounds like I can get a deal finding a swap lease where maybe half or all of the tax is already paid.
There is no reason for I-66 to be 55mph from Centreville to the beltway other than to generate revenue.
Thanks for the info. But what happens if I lease a car from Swapalease from a state that has a lower tax than Maryland’s 6% – for example, Virginia? Do I get some kind of tax credit or rebate?