Trade in car good idea while leasing?

My fellow LH members

I have heard that trading in old car while “buying” a new works out better as buyer saves on “sales tax” of trade-in value of old car.

How does this work while leasing a car? Atleast on lease friendly states who do not charge upfront tax of entire value of car while leasing?

Does trading in car while leasing gives any tax benefits? If not then generally selling car privately is better option?

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.

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I traded in a car on my pervious lease. Reduced my payments by the appropriate amount. What else you going to do with it? Sell it on your own?

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.

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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)

they prorate the single payment amount and refund the months that are remaining.

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.

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You can trade in and ask for a check back based on the value of your car.


Where you have equity in your trade, for a monthly tax state (or a full tax state which doesn’t reduce tax basis for trades), this is the only answer.

Ouch. Thanks for the advice, I will keep my car or try sell it privately than trade in while leasing.