I live in NJ and wonder how the tax for the lease is calculated.
I tried using Leasehackr calculator but the tax amount doesn’t quite line up with the sheet dealer gave me.
And working by hand, I thought it’s just (sale price - residual) * 6.625%, but the number doesn’t look right.
Also the luxury tax is sale price * 0.4%, right?
And lastly, if I trade in my current car (owned), do I get tax deductions off the sale price? Internet says yes but the dealer told me no.
Apart from this being a bad deal that I’m currently working on, I’m more interested if the numbers check out.
So using the tax formula, both state tax and luxury tax checks out. DMV fee though I’m not sure.
The dealer tells me to put down 3000 in cash, with rebate that would be 4500 down payment. But I don’t see where the “CapReduction” 1275.16 comes from
cash rebates and customer cash cap reductions are taxable. Trade-ins are not taxable. Essentially, you wouldn’t be taxed on the equity of your trade-in. Example: the dealer is willing to give you 10,000 for your car in which you owe 8,000. … 2,000 is your equity that can be used to reduce the selling price ( cap reduction). Or, you can have the dealer cut a check payable to you for 2,000.
The $1,275 may be what is left from your $3k customer cash as they used it also to pay off other item upfront. Not really clear what that would be besides the DMV fee though. DMV fee cannot be marked up but odd they didn’t include a doc fee.
It’s easier to negotiate a better lease without the trade involved so suggest wait until you are happy with the lease deal and then introduce the car and see what they offer. Try Carvana and other services to see what they come back with, otherwise sell it privately if you aren’t getting a fair price. If you do trade it in, get a check cut for anymore than the fees you want to pay upfront otherwise it just acts as a down payment which is not recommended.
You’re allowing the dealer to control the deal. Below are my calculations which match the dealer’s except we are $0.52 apart on the sales tax and our DAS do not match. Their sales tax calc appears to be off…
Your DAS should be 2,467.94. However, I would not put 1,275.16 down (i.e., cap reduction). A car is a depreciating asset. If you total the car, you risk losing all or part of your down payment. DAS IS NOT a down payment unless it consists solely of cash cap reductions. Down payment applies only to cap reductions.
This is not accurate. Equity is irrelevant when it comes to tax credit. Trade value comes off the cap cost before taxes are applied, then loan balance and/or cash issued back to the owner are added back in.
There is a luxury tax in NJ of .4% for new car over $50k so that’s where the extra $224 of sales tax is coming from.
I’m not clear what else the $1,725 is going towards either. First month, DMV, tax on cap cost reductions, but still a few hundred dollars short. Maybe a hidden doc fee? Dealers really make it hard to determine their math, obviously on purpose.
I’m not talking about tax credits. OI’m talking about sales tax. Cash cap reductions are taxable. Equity cap reductions are no taxable. I’ve negotiated leases in many states and this has always been my experience.
Equity has nothing to do with it when trading in a vehicle you purchased. You paid tax on the entire vehicle whether or not you still owe money on it. So if they give you $10k and you owe $8k, yes, you get $2k equity, but you get a tax break on the entire $10k.
So, let’s say the tax on the lease alone (ignore the trade) is 1400. Next, consider my 10K trade. If the tax credit on the entire 10k is 600, then I’m paying 1400 - 600 = 800 tax? That doesn’t make any sense. If I owe 8,000 on my trade and the dealer pays it off leaving me with 2,000 equity to apply toward a cap reduction, why would I be entitled to a tax credit on the entire 10k? Maybe I’m missing something.