RAV4 Prime lease incentive and early buyout Ohio Edition

Ask the Hackrs
1

I am an Ohio resident. I have never leased a car before and I have a deposit on a 2024 Rav 4 Prime premium that it should be available middle of May. I was planning to purchase with cash, however, the lease incentive from Toyota TFS has got my attention and I’d very much like to make the most of the $6500 Toyota incentive. Here’s my question and forgive me if this has been posted elsewhere, but I looked and I haven’t found anything relating to my circumstance in Ohio where tax is levied upfront on the total lease payment.

The dealer will set up a lease with their usual terms from TFS ($650 acquisition) and credit the $6500 incentive off the SRP, however, the finance manager is saying that because of the sales tax situation in Ohio I may not realize as much savings as I might like. In Ohio the state levies sales tax (6.75%) on the sum total of lease payments at the outset of the lease. This is handled by the dealer at time of sale. For me the issue arises when I come to by out the lease, probably in the first month, and then subsequently go to register the vehicle in my name at the Ohio BMV. At that point I believe pay sales tax on the buyout amount, which because I’ll be doing it in the first month, will be very close to the original purchase price. This appears to be some form of double taxation and it is even acknowledged in the Ohio code at this hyperlink. I will still net some proceeds of the rebate, about $2K after paying the lease upfront tax, but I’d like to figure out how to maximize that.

My question to the experts is, does it make sense to attempt to structure a lease for the absolute minimum amount of total amount financed by making a large cash down payment on the purchase? I’ve used the LH lease calculator tool to check 2 scenarios (zero down and 25K down) and it shows that the monthly payment is significantly reduced with a large down payment. Links here: Zero down $25K down.
Am I missing something?

Sorry for the absence of deal specific figures as I see a lot of people on this site like to deal with the numbers, but I’m trying to decide on a next step with the dealership.

2

If you’re planning on buying it out, lowering the monthly payment isn’t important to achieve. The risk with a large down payment is that if a drunk totals it the first day you have it parked at your house, that money is just gone.

3

Thanks. Is insurance on leasing different in some way? Wouldn’t that situation apply if I’d paid cash for the vehicle?

4

Rather than do a traditional lease with a large down payment, do a single pay lease. Theyre contractually different things, with different liability risks, different rent charges, etc.

5

The thing is, while it’s leased you don’t own it, so if the insurance payoff differs from what you owe on it, it’s the bank that gets the difference, not you.