Have been following this thread. I was looking to lease this same car but higher trim, after seeing the markup above msrp it was an absolute no way. Every dealership is marking it up by 4k-5k. What is the point of the $4500 toyota rebate when dealers are just marking it up. Makes zero sense to buy or kease this car.
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$4500 bird in hand has cash value??? Not quite.
Not with the dealerships marking it up $5000
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I can understand all the concern around paying $4.5k over MSRP since this is a lease forum; it doesn’t make sense if one is going to lease the car for just three years. That will increase the lease cost by about a third, which is indeed ridiculous.
But I kept my last Prius for 20 years, and plan to go for the same with this one, driving it until it depreciates to zero. Over 20 years, that $4.5k is less than $20/mo.
This is nearly the cheapest plug in hybrid on the market while outperforming nearly all on electric range. None are even close on cost for range. For someone like me that wants the energy independence of being able to drive on gas or electric, and is willing to pay a premium to reduce my effect on the environment, there are no more affordable options.
I will mention that the quirks of Texas lease tax law scare away brokers and dealers from out of state (e.g. @Jrouleau426 ) since they don’t have clear info on what taxes will be in this unique situation. So buying from a local dealer (and doing my own research on taxes) cut through that roadblock.
Finally, when the EV lease rebates expire (they are government programs) that will increase the cash value of my now-used vehicle.
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Justify it however you like, The dealer still be like:
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Please come back in 60-90 days to share the outcome. I’m genuinely curious. I understand why you and some people are confused, and even some tax assessors. The law is just poorly written (but with the original intention, you are meant to be double taxed). I can predict that you will get a bill from Toyota you will be unhappy with. They’ve gone through this hundreds of times. You won’t be able to fix this with Toyota. Either you give up or try to fight and get refund from Texas tax office directly. It will be a tough battle. This guy (Help with Taxes in Texas - #14 by mrsmith) got lucky and won. I personally think the tax office misinterpreted the law and gave him refund in error but you might be able to win it like him. I’m linking it to give you a chance to do the same, but I think the chance is low.
I spent ~2 hours reading laws and even attorney general’s opinion letter from 1959! LOL
- True lease: You pay sales tax for leasing company at the start (unless leasing company eat it up but why would they), and you pay your own sales tax later. This is what people have been experiencing by default. Stated in law (d)
- Sale disguished as lease: so this is to combat sketchy deal where you do something like setting residual value to $1000 to get favorable business tax incentive, etc from leasing vs. purchase. This basically turns sketchy lease to sale for tax purpose. Law (b) and (c) are applicable. At the end of day, (c) makes sure you get offset and the final sales tax come out similar to what you would be charged if you just purchased the car outright. Language describing this (b) and (c) are throwing people off. In the linked version below, the intention is clear. The original law makes people think about cases where end of lease purchase price is below fair market price due to uncertainty of price in 3 years, whereas the law intended to just fight the scenario residual was intended to be much lower in 3 years. “If the transaction is considered to be a sale and not a lease, as described in subsection (b) of this section, no additional motor vehicle sales tax is due at the time the initial lessee/purchaser takes title to the vehicle, provided the correct amount of tax was previously paid on the total consideration. If the correct amount of tax was not paid on the total consideration, the lessee/purchaser must pay the difference when the vehicle is titled in his name.” This part is only applicable if agreement is sale, not lease. It is sale if one of three conditions are met "the lease contained an “option to purchase” at less than fair market value or a “must purchase” clause or if the vehicle is sold to the lessee at less than fair market value" Despite the probable intention of the law, if your Prius’s residual value is few dollars lower than fair market price, you may be able to try making a case that your agreement is sale, not lease. I think that’s the only way you can win. Actually not sure how these will be interpreted for early buyout.
This version is MUCH clearer than the official law version. It’s still from gov website. Looking at both, the intention is much clearer. It would have been much clearer if law mentioned nominal value instead of saying less than fair value. Even the attorney general says it’s sometimes hard to distinguish party’s intent. There’s also a law firm guy who seems to be (possibly intentionally) misinterpret it to help people fight the tax office. You can try him/her too but it won’t be worth the fee.
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Thanks for all that info. I will try to check back in after all is said and done.
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Today I spoke with TFS. They gave me a payoff quote of $34,366 which seems about right given that my capitalized cost in the lease agreement was $34,657 and already I paid my first $533 monthly payment.
They said they will not be collecting any additional tax, and advised me to look into tax consequences with my local government agencies.
I plan to send the check tomorrow and they say I should have my title in 7-10 days
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Now comes the interesting part - The TFS folks have minimal knowledge of all tax liabilities.
I assume after the 7-10 days, they will send an electronic title to Texas DMV that removes the lien holders name. You have to go to your local tax county office to get the title in your name (assuming you made the payoff in full and not taking a loan for the purchase). This is where i got socked with a tax bill. Its a 28$ fee to get the car re-titled in your name and to remove the lien holder - but the minute you try to get the title in your name - the system will prompt the local county tax office to collect taxes due on the 34,366$ at 6.25%.
Good luck and hopefully you get lucky - but do post your updates once you get a chance to go to your local tax office to get the title.
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That’s crazy. Not just tax part but also all the extra steps you had to go through.
In MA, Audi collected sales tax from me on top of residual and sent me title few weeks after. I just had to go to DMV to register the car as usual. TX seems more complicated. MA yearly excise tax wasn’t fun though haha.
Good luck OP, let us know how it goes. Remember there was a tax office that interpreted the law your way (link in my comment above) at least once. It will be an interesting data point.
The TFS rep made it sound like I would get the title in the mail, but who knows…
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Depends on if you got a paper title or e-title.
Most titles these days are e-titles, which means you will get a notification of a payoff letter from TFS. You take that letter to your local county tax office to get a new title issued in your name, minus the lien.
https://www.txdmv.gov/motorists/buying-or-selling-a-vehicle/add-remove-lien
Its actually the same here too, the only difference being you do it twice.
How i have seen TX work is like this:
Transaction 1: You lease the car.
Lien holder is the lessor (Ally, TFS etc.) and you are the lessee.
The dealer acts as the licensed broker and collects taxes due (in TX its the full Purchase price of the car - So 6.25% of final selling price (incentives are untaxed)
Transaction 2: You buyout the lease
The lien holder sends you a confirmation of payoff
They send TX DMV an e-title
You walk in to the tax office to get a new title (after removing the lien holder)
Now there is only one entity - YOU ! so no lessor and lessee (or bank and customer)
How the TX County tax office works is unique - They do have a tie in to the DMV network but they do their own calculations on taxes owed (there is also another weird rule in texas that cars are considered as a “property” and property tax is due) - Refer to my post on that here: GM Financial - Lease Transfer - TX - Do i owe property tax?
Its a clusterfuck i tell ya!!
So to all poor bastards who lease in TX - Good luck!
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OP will pay the tax on the buyout amount at the tax office. I’m in TX
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I’m frustrated at the OP, because as long as people are willing to get robbed in broad daylight, dealers will keep pulling this stuff and we wont see deals. This dealership will now expect to find more suckers to pay 15% markups on mass production cars rather than give it to someone whos ready and willing to pay MSRP today.
Then we wonder why $20k cars are leasing for $500/month. They’d rather sell 25% of the cars, but make $5k markup as pure profit on suckers like the OP.
Nothing personal, but you got robbed, and youre contributing to this market.
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I’d like to see the full document and some context. We really don’t know the posters story.
Counterpoint: The people who cover dealer overhead by paying more than market value are the ones that enable the below-market deals. Another analogy is credit cards: The people who carry balances at ridiculous rates are the ones who fund the cashback, miles, and other perks for those of us who don’t carry balances.
And I’m honestly not convinced my deal was that much over local market value. The dealer originally asked $10k+ over MSRP, I came back with $4k over MSRP, and got the dealer down to $6k over. We stayed at that impasse for 5 days, with the dealer unwilling to sell it for $4k over. I upped my offer to $5k over after the 5 days, and that got the deal done.
Also, some people would consider the port package ($1k for OEM matts, polish, seat spray, USB cords) to be part of the MSRP which would mean I only paid $3.5k over. And I did benefit to the tune of a few hundred bucks from the dealer package of tints, wheel locks, etc.
No one would consider that part of the msrp.
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The BS port packages seem to be a Gulf State Toyota thing; I’m not sure you can even buy a Toyota around here without them; all ten of the Primes within 500 miles of me had that port package. Certainly there is much more profit to be negotiated away in that package versus the base MSRP, but it is unavoidable out here.
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