Selling lease -> buying


Good morning. We’re currently leasing a 2020 Ram 1500.. My wife is needing to upgrade her horse trailer so its time to get a 3/4 ton. Leases on 3/4 are horrendous and we’ll just be purchasing for her business. We’ll have positive equity from selling the lease, mostly likely to Carmax.

My questions is, will the sales tax be calculated on the full amount of the selling price of the vehicle EVEN IF we “sell” it to them, or will it be like trading in a vehicle with a loan.

The difference is about $2000 in taxes.

If your trade is a lease you typically don’t get a tax credit since you don’t “own” it.

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The loan aspect of the question is regardless. It isn’t so much as to how the vehicle is paid for… it is the ownership portion. With financing or a “cash” purchase, you would own the vehicle. With a lease, you legally do not own the vehicle unless you choose to buy the vehicle out. In that instance, you would then pay sales tax…and the sales tax waiver would be applicable on the new deal.

Also, most states require the two transactions to take place at the same time; most of the time you would not be able sell to CarMax and receive the tax waiver at another dealership. The dealer (CarMax) purchasing your truck would be transaction #1. You purchasing the new 3/4 truck would be transaction #2.

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Makes sense. Thank you both. Just wanted to make sure the dealership wasn’t mistaken. I just assumed that since I am “selling” it to them I would be able to take advantage of it.

The transactions having to be done at the same dealer I understood, if it were to apply, but I appreciate the explanation.

Haven’t seen any prior discussion of KY tax laws here but there’s a chance you get a tax benefit of the equity, ie the taxable amount is reduced by the equity.

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