playing with numbers on leasing a new volvo xc90 T8 Ultra. I’m finding conflicting things on a sort of loophole/trick. In Ohio we have to pay the full lease tax upfront, AI and a few posts have said the trick is to trade in to the selling dealer. I put this into google and their AI (I know I know) puts it like this:
Do not sell this car to a separate used-car lot like CarMax if you plan to lease. In Ohio, when you trade in a vehicle on a lease, the trade-in value reduces the taxable portion of your lease.
If your XC70 is appraised at $4,500, that full amount acts as an additional capitalized cost reduction.
This effectively knocks another ~$130/month off your payment on top of your stacked incentives, while saving you 7.5% in Franklin County sales tax on that portion of the deal.
anyone find this to be correct? I’m not frankly understanding the incentive, if I got $4,500 by selling it, I could offset the tax.
I’m not sure who told you that you have to pay the taxes upfront as that’s not correct. I’ve leased since 2004 in OH & I’ve never once paid anything up front. Most recent lease was in March. Gahanna resident.
As far as reducing taxes AI was correct. If you’re trading in a vehicle it reduces the amount of taxes paid on lease amount. For your example that would be $4500 that would not be taxed towards the lease price. So if the lease was going to cost you $18k in payments you would only be paying taxes on $13.5k if you traded the vehicle in. If you sold it to someone and then put $4500 down you would be taxed on the $18k hypothetically. I’m wording this poorly.I hope that makes sense.
You’re still technically paying the taxes upfront, and then financing them. OP is the best form of correct, technically correct.
In terms of reducing liability, some states also tax that capital cost reduction - Ohio does reduce tax liability by trade in.
To OP, excellent point, but you save 325 on sales tax trading it in, if you shop your trade and new car deal separately as we recommend, and you get more than that for your trade elsewhere you would be better off taking that and investing it elsewhere at a higher yield than the interest charged on the borrowed amount of your lease.
This is how stupid gpt is. Nothing got knocked off your payment. Equity from an owned vehicle like a XC70 is equivalent to cash. Ofc putting down cash will reduce the monthly payment, duh!
All that happened was the following steps were skipped: taking the equity as a check, depositing the check, and then writing a check or tapping a CC to put cash down on the next car.
The trade-in value should not be confused with trade-in equity. The trade value is reduced by the amount owed on the traded vehicle, whether it’s leased or not, to arrive at the trade equity which can be used as a cap reduction to reduce your monthly payment. If you are capping non-taxable fees, then those fees must be removed so that the taxable base payment can be calculated. Tax in Ohio is levied on the sum of the taxable base payments, cash/rebate cap reductions, acquisition fee. The trade equity is not taxed even if the trade equity is on a leased vehicle.
Very much appreciate the detailed answer delta, frankly that’s going over my head mainly. I’ll have to have a think on it when I get time. Currently stuck in last minute zoning code law quagmire that is not of my making, fun, fun.
yes I’ve rolled the taxes into my leases. The point was that it’s not required as OP stated.