Trade in vehicle new lease sales tax credit?

Ask the Hackrs Buy/Finance
1

Hi,

I have a general vehicle trade in towards leasing a new vehicle for sales tax

Assume lease would be 36 months for $50” a month and sales tax is 10%.
Total lease payments would be $550 for 36 months

This would mean that sales tax for the entire lease is $1,800

  1. If during the lease purchase I trade in a vehicle worth more than $18k, would that be able to wipe out the sales tax portion of the lease?

  2. If it can, assume I lease and do an immediate buyout, would my payoff amount be the adjusted cap cost + sales tax on the residual value only and not the full adjusted cap cost?

Thanks

2

No. Most states don’t allow this on leases, but it does vary from state-to-state.

Huh? You would owe the residual plus the remaining payments. Some banks make you pay some or all of the interest charges too.

3

Such a state-specific question, you wanna mention which state?

2 Likes
4

Sorry this is for Washington state.

Also for the second part of the question I was hoping that if the trade in does reduce taxes. That if I did a buyout, I would pay the rest of the depreciation plus the residual but only the additional tax for the residual vs all the depreciation payments. I hope that makes sense.

Trying to do a lease then buyout to take advantage of EV credits.

5

https://dor.wa.gov/education/industry-guides/auto-dealers/trade-ins

Sounds like you would get sales tax credit against the lease, but i wouldnt expect that to carry forward to the 2nd transaction.

6

Remember things like rebates and down payments are taxable too!

7

The key for the OP to remember is that the car being traded in needs to be owned, not leased.

8

:point_up:
10101010

9

I have ‘traded in’ several leased Jeeps and always gotten the MD tax credit against the new lease. Technically I guess I am buying the vehicle and trading it in to the dealer, but the dealer handled all the details.

10

You’re not in WA though.

And if you’re doing a 3rd party sale on a CCAP lease (which I really hope you’re doing if you’re doing this with multiple Jeep leases), you aren’t ever buying the vehicle.

11

Maryland has different rules, and you can do a lease-to-lease on a trade. :slight_smile: