A trade-in allowance will reduce your sales tax. And reduce your Rent Charge. Consequently you will have a lower monthly lease payment. An you will get some credit for the down payment if the lease is terminated early because of a wreck.
Virginia does not reduce your sales tax for trading in a car. Still pay on the gross sale price before trade in.
VA is the worst lol when it comes to buying new vehicles.
In some east-coast states, when you buy a new car say of value 20k you pay sale tax on 20k.
If you trade in a car with final value of 5k, you pay sale tax on 15k of your new car.
So we always consider “trade-in value + sale tax” as total worth of trade in value.
However as far as i know, In case of lease , these states pay sales tax only on lease monthly amount hence my question.
how does this work actually? If I lease and car wrecks, wouldnt my insurance cover total cost of the car at that moment? Which should be enough to close the finance on the car?
In this case, the trade-in amount lost its value? (unless I get the check from insurance for wreck amount)
In California, you only pay tax on the monthly lease costs. If you purchase, you pay tax on the entire purchase price. There is no reduction on the sales tax for trade in value.
Don’t do it. I traded in my car on my first lease. 5 months later a lady ran a stop sign and totaled my car. When that happens, you don’t get anything back for the trade in you gave them. Her insurance paid off my lease and that was it. I called and complained to Ford Credit that they had received $9k from my trade in, 5 payments from me as well as a check for 30k from her insurance. Ford had received over $40k for a $33k fusion. Ford sent me a check for like $3k.
Long story short, don’t do it.