I’m in the process of buying a 2023 Sportage Hybrid and trading in a Rav4 lease. There is 9k in equity in the Rav4. The salesman said that 9k does not reduce the tax expense on the new vehicle I’m purchasing. Doesn’t seem right. I know I didn’t pay tax on the whole value of the Rav4 but I did pay NY taxes on the leased portion. Just want to make sure this is correct info I’m getting. Thanks
Not sure about NY taxation but you don’t even own this car…you would have to buy it out of the lease which includes paying taxes on the residual to be able to use it as a trade with tax credit if NY even does that.
Correct. I don’t own it but did pay tax on leased portion of it. So If I buy it before I trade it in then I’d pay tax on 21k(buyout) but get a credit of 30k (trade in value) on new purchase. That would essentially save $731. Not sure if it’s worth it.
Might be easier to get an extra 1k trade in value using car max, caravan, vroom ect. Since there’s no trade in tax credit there’s no benefit to trading it in at the dealership I’m buying the new car from.
Your salesman is correct regarding the lease equity and sales tax.
If you did buy the lease out at $21k, pay the sales tax, then you could potentially have sales tax waived on the sale price up to the value of your trade.
I’m not familiar with this portion of NY law, but the tax waiver amount can be capped depending on the state. In the instance of my state, we have no limit.
Appreciate the feedback. The concept still a little gray for me. I just purchased a truck in august and we traded in my wife’s Subaru. They gave us 8k for it and it reduced my tax bill by 8k for new truck. No questions were asked. Who’s to say I didn’t buy that Subaru pre Covid for 5k, paid tax on 5k and now they just gave me 8k with an 8k tax reduction?
I was thinking of a different scenario, and I was mixing a lease buyout deal with a straight trade deal.
Yes, again unless NY is different, you could receive a sales tax waiver on the new sale price (of up to the trade value). And would you be writing a check to buy the lease out or finance? I’m not certain how strict TFS is with the lease buyout process, but it may become more costly than you’re anticipating.
Understood. The new car is supposed to arrive late next week so dealing with all the moving parts of trying to buy it to save $700 probably not worth the hassle. As I mentioned I think my best bet is to shop it around to highest bidder and call it a day.
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