I just wanted to double check. What is taxed for leases in NY. I had always understood it as depreciation, taxable rebates and acquisition fee. Is the interest collected through the bank also taxed and added into the lease as well? Thank you in advance.
Yes, it’s all taxable.
Question for my fellow New Yorkers. Is it more sensible to pay taxes upfront or roll them into the lease payment?
Depends who you ask…
The consensus on this site for the most part is to do no money down and roll all the fees into the monthly payment so it protects you from losing that money in the event the car were to be totaled.
NY sales tax is computed on the sum of the monthly base payments. However, their methodolgy is a bit different than other states that compute tax on the sum of the monthly base payments. FYI…
This was actually a memo I sent to a NY Volvo dealer with, whom, I was negotiating a lease a few years ago.
Questions? Let me know.
Statistically you come out ahead by not paying interest on taxes and by not paying taxes on non-taxable items such as govt fees
Well, I’m not a New Yorker. But, I can offer you a few facts about capping taxes as well as other fees, into the lease…
1st. As already stated by @nyhacker, you could lose a substantial portion of your fees if paid upfront in the event the car is stolen or totaled. The reason is that the insurer will pay the ACV (actual cash value less deductible). If the lease balance exceeds the ACV less deductible, then your GAP coverage will pay the difference assuming you have GAP. However, if your lease balance is less than the ACV (less deductible), then you are on the hook for the difference. As such, you want your lease balance at any point in the lease to be as high as possible and, yes, even if you intend to exercise your purchase option at some point. The more you roll into the lease, the higher your unpaid lease balance.
2nd. A car is a depreciating asset and, therefore, an expense and not an investment. It’s best to conserve your cash for other more productive uses.
3rd. If the interest rate (i.e., cost of money is low (below market rates)), I would pack as much as possible in the lease… it’s almost like free money… In other words, roll in as much as you can into the lease. Never ever make a cash cap reduction unless you have no choice.
How on earth could one ever pay taxes on non-taxable fees? And, paying interest on capped taxes is really no different than paying taxes on any other capped fee (e.g., acq fees, doc fee).
sometimes, it’s worth it to pay taxes and fees up-front, like in the case of any of the germans at the moment. you’re financing at around a 4% interest rate, so unless your money is earning more than that elsewhere, you’re better off not borrowing at 4% and paying it up-front. however, it still bugs me to have to pay money at signing.
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I have seen some dealers try to give you a discount off MSRP to get to a selling price (in addition to a rebate) as a cap cost reduction which would be taxable.
This is simply not true, the unused portion of your sales tax is refunded to you in the event of a total loss. I’ve dealt with this more times then I would like to admit
Is that universally true? Does that hold true in every state? Also, notice that I said “you COULD lose…” Nothing definitive about that!
What happens when you capitalize those fees?
Every state that charges upfront taxes based on the lease value like ny, yes. Incorrect sir, like you said… you aren’t from NY… so don’t mettle with our taxes 
Non-taxable capped fees get taxed. Tax is computed on the base payment which excludes non-taxable fees. The final lease payment includes all capped fees including capped non-taxable fees. I’ve never had a problem with this.
Really? Does that hold true for Illinois, Ohio, South Carolina, and South Dakota? Can you provide documentation? Don’t have to be from NY. I know how taxes are computed in NY. And, perhaps NY does refund the unearned portion of the taxes in the event of a total loss. I never claimed otherwise! 
Please re-read what I said… Those states don’t calculate tax on a lease like NY (at least SC/IL)… so the discussion is irrelevant as you wouldn’t pay it upfront to start with
You didn’t know how it was calculated in NJ earlier, glad to see you are learning!
Insurers must only reimburse sales tax for claim amount, not the
replacement vehicle cost. Ohio Admin. Code 3901-1-54.
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Those states calculated tax on the sum of the base payments just like NY. However, the methodology that NY uses is different. See my posted image above…
NJ… payment tax = base payment x term x tax rate
NY… payment tax = base payment x term x tax rate/(1- tax rate)
NY computes tax on tax. If I don’t know how to compute NY or NJ taxes, then why do my calculations always match NY and NJ dealer lease worksheets unless the worksheets contain an error which they sometime do? Also, why did a NY Volvo dealer ask me to explain how taxes were calculated? My calculations match their lease worksheet. See the above post and screen shot.
They haven’t in the past and I’ve corrected you… glad to see you are learning. Bravo!
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How about Illinois?