I am living in Texas and I am moving to Michigan in couple of months.
I am considering to lease a car here in Texas then transfer to Michigan, or I should wait to lease in Michigan. Tax in Texas is more costly but I may have good discount to cover. My employer will pay shipping cost.
If I understand correctly, effective tax liability of a $40k car lease in Texas (pay all tax up front) can be about 1.5k higher than that in Michigan. Please help to correct if I am wrong here.
Assuming if I lease the car in Texas and pay lease tax here, when I move to Michigan, do I need to pay lease tax monthly there again? If yes then does Texas refund my tax so I can pay in Michigan?
Why wouldn’t you just wait until you move to MI? Tax advantage is significant (highly doubt TX will give you a dime back) and I don’t know why you think you’ll find a “good discount” in Texas compared to MI unless you have some regional incentive on a particular car that MI doesn’t have. Detroit Metro is a pretty aggressive car market.
Texas charges lease tax based on the full sale price of the car. If I remember correctly (I leased in TX and moved to CA several years back), your TX tax is usually figured in to your monthly lease cost, so DON’T pay it up front because you won’t get any refund when you move. In most other states, tax is on the monthly rate so you’ll have to pay your monthly cost plus whatever the sales tax rate. You will be liable for tax in the new state regardless of how you paid it in TX.
Did you get your monthly payment lower when you moved from Texas to CA (due to in CA you pay tax for lease amount only)
From FAQ on TX DMV website, lessor needs to pay full tax when the car is registered. I am just wondering if the other state charges tax again while I am paying lessor montly for the amount they already PAID (if they don’t get the tax back, I am not sure if they can remove that amount from monthly payment)
I will buy a foreign car so I am not sure if there is incentive in Detroit for that. Foreign cars seem to be very popular here in TX and this is year end moment so I may gind a good deal.
Basic laws of supply and demand = if demand is lower, you will get a better deal. And there are plenty of “foreign” cars here, domestics are just in the majority for obvious reasons and also because almost anyone can get employee discount.
FWIW, I bought my Accord Sport in Metro Detroit for the lowest price I’ve seen anywhere on the internet.
I had to go back and look at my original lease contract from 2012 to see exactly how it all worked, I didn’t remember the details, I just remember feeling like I got screwed by TX and would never lease a car there again.
So here’s the way the $$ worked (short story, I got screwed bad and you probably will too):
I leased a new car (2012 VW Golf) from a dealership in Houston while I was residing briefly in TX. The cost of the car without sales tax was $26,161. They calculated my up front sales tax on this amount and added $1,651 to the capitalized cost of the car (I think their sales tax was somewhere around 6 - 8%). Then my lease contract was structured around the NEW capitalized cost and my monthly payments came to $335.16/mo (they would have been lower if the cap cost didn’t go up by $1,600). So basically they just increased the price of the car and gave me higher payments, no additional tax was charged on the $335/mo by TX.
When I moved to CA (only 2 months later!), I then had to pay $335/mo PLUS 9+% CA sales tax on that figure, which made my new lease payments around $364 per month for the rest of the lease! So basically I ended up paying the TX sales tax PLUS the CA sales tax, and CA even taxed me on the tax that I paid TX! I didn’t just get screwed once, I got screwed 3 times! Needless to say this really sucks. I also tried to get CA to deduct the tax I already paid in TX from my lease price but they would not do it as TX taxes differently than CA does. Now things may have changed since 2012 and may be different in your state, but based on what I had to go through from TX to CA, it’s most definitely a VERY BAD idea to lease in TX if you are going to move out of state before your lease is over. It’s probably a bad idea for anyone to lease in TX because they treat leases as sales, in terms of how sales tax is levied, and you get taxed on the sale price of the car, even if you only lease for a few years.
