NJ - Mercedes Benz GLE 450E $7500 ev credit Q

Hello guys,
I have a question about lease purchase. I wanted to buy GLE 450e but to take advantage of $7500, I leased it first as I was under the impression that if buy it upfront I will not get that discount. When I called MBUSA to purchase the leased car they told me that I will have to pay $2735 in penalty and pay NY state tax on the full price of the car not on the residual value. Tax amount is $6365 even though I have already paid $2900 in NY state tax when I leased the car two weeks ago. Any comments? Thanks.

The devil’s probably in the details. We will need to see your original lease structure/details to really break things down. I’m not sure what is the $2,735 penalty.

The $2,900 taxes you already paid probably includes state sales tax against the $7,500 EV rebate (it’s a taxed incentive in most states) and other up-front taxes. So yes, if you buy out the car you’re looking at even more taxes. Sucks.

Thanks for the reply. The details are as follows,

MSRP: 86495
Following were the incentives,
Dealer’s discount: $5069 (6%)
Mercedes reignite discount: $3000
Fleet discount: $500
Fed tax rebate: $7500
NY state: $500
Waived first month lease: $1056 (Includes 3 years service contracts. Excludes taxes and fees.
Saved on three years service contract: $1500

You should have asked before signing the deal. I think you’ll end up paying more going this lease+buyout route for 2 main reasons: MBFS has an early termination penalty and NY charges taxes upfront.

There’s no way of getting around a 4% penalty for early termination if it’s in the contract.

But the tax burden could have been reduced if you had structured the lease as a one-pay at the beginning. And possibly negotiated a larger discount in itself and more for a higher MF.

But that ship has sailed. These cars are really not hackable on a 3yr horizon for either lease or ownership. The only way to bring your annualized cost down is to own it long term.

2-3 oil changes and a brake flush are not worth $1,500.

Look into paying extra payments before initiating the buy out to lower the adjusted lease balance.

As 3 years maintenance is structured in to the lease, I paid only 432 dollars. A saving of $1068

During month of June the first month lease by Mercedes was free. That was a saving of $1056. Plus I saved $1068 on three years lease. That was a total saving of $2124. If I pay penalty of $2735, basically I will be loosing only $611 if I buy the car.
Fed and NY state tax credit is $8000. If I pay extra tax of $4000 to NY state, still I will be saving $4000.
So, my total discount will go down from $16500 to $12500 if I buy the car today. I think it is a good amount of saving. I will appreciate you input before I go ahead. Thanks.

$1068 saving on three years maintenance as it was structured in lease

How does a one pay lease reduce the NY sale tax burden? It also seems one way to reduce the 4% termination penalty is to actually put up a large downpayment, which will reduce the lease balance the 4% is assessed against. I know normally you would not do this on a lease but since you will be buying out the car immediately seem like the usual downside doesn’t apply or am i missing something?

In a simplified example

If a conventional lease is $1,000/m pretax then the tax basis is $36,000. A one-pay of, say, $32k pretax would thus have a lower tax basis. So the lease section of the equation has a lower tax burden.

Then the buyout has a lower tax burden because the payoff is the RV.

You save two ways.

Does a one-pay reduce the “principal” lease payment? I thought it only reduced the interest/MF?

It reduces the depreciation to $0 as you paid it all upfront, but there are no savings. The savings are from MF reduction.

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On a lease followed by immediate buy, you’d rather pay sales tax on the buyout at RV than at ACC.

Unless you do onepay where the adjusted cap cost is significantly lower than the residual value.