A buddy is going through this exact situation now and knew their would be a detailed outline from @AP919…Our LH tax guru!
Related but different question; since NYS will charge taxes on the remaining payments, is it advantageous to prepay a bunch of months prior to the transfer, especially if it’s coming from a lower taxed state that does monthly tax like PA?
One car he looked at on SAL oddly had a bunch of payments prepaid and got me thinking. Can NYS tax something already paid or they going to see there is “x” number of months left on the lease no matter if they are paid or not and tax you on that?
Since NYS & local tax all in is around 9%, there can be a significant cost savings.
Thank you for the clarification…Didn’t realize PA had an extra lease tax.
Still interested to see if NY will tax the prepayment as there are other nearby states it could make sense with. I’m assuming they will tax you but worth a try.
It’s an interesting question. As I noted above, they tax the remaining payments. If the payments are prepaid, presumably it’ll still say there are X payments left, but you are taxed on the balance that is assumed. So if there is $10,000 remaining on the lease balance, but $4,000 is paid in advance as an incentive to the transferred, then technically, the balance remaining is $6,000. I know some leasing companies don’t let you pre-pay on a lease, so that’s something to consider, too.
On the other hand, the bank may let the transferor make a lump-sum payment at the time of transfer, which then lowers the balance of the remaining lease.
The way i read it, there is still somewhat of a gray area depending on how they define “remaining payments” as that can be different than account balance. I’ve never overpaid a lease, but assume it shows as a negative balance and then the monthly invoices are generated normally and applied against the balance like a retainer?
Does the NYS DMV get the payment amount directly from the bank I assume?
I would think it would be whatever amount is reflected as the remaining balance, as in what would appear on a credit report.
It’s been the dealership that has paid for me, but whether that is via the captive, I have no clue. I always finance the tax, because there are too many “what-ifs” to put that money at-risk. I just read a case where a guy transferred his lease because his wife died, and the court said “too bad” and wouldn’t refund him. It also cited other cases, such as once where a car was stolen after 4 months, and a refund was denied. I’d rather pay a little more by financing the tax and essentially paying tax on tax, because you never know. I also came out ahead because I did a pull-ahead and didn’t pay for the last 4 months’ worth of tax.
Thanks! I did (sadly) read the NYS taxation document and noticed there are very few exceptions where you would be entitled to a tax refund, mainly a Lemon Law case.
If he moves forward with the transfer, I’ll let you all know how NYS handles the prepayment.
Ok, so when you finance the tax and (let’s say) BMW fronts it - if there was a loss like a stolen car - fronted taxes are BMW problem? Or are they same as deficiency balance needed to have GAP?
On the other hand - let’s make it extreme and transfer OnePay lease. No remaining payments to tax:) How does NY gets his money in that case?
PS @AP919 Thank you for all the tax research and translating it from lawyer-speak to plain English:)
I believe the difference is covered by gap in the situation where there’s an insurance payment. Because BMW would be the insured on that end, I presume it would be part of the overall lease balance due by the lessee and thus BMW is “reimbursed” that way. Don’t quote me on that since I don’t do insurance law.
A one pay lease is an interesting animal. It technically counts as a sale as NY generally categorizes lease transfers and this would be taxable. I believe that the amount would be amortized over the months remaining and that’s how tax would be paid. I’ll be honest that I haven’t seen anything about one pay leases, so I really can’t be certain on this one, but that’s what would make sense to me.
Folks, I would say that this is not unique to NYS. I had a similar issue on a 36mo Honda Civic lease for my daughter where we did a sign and drive, so NJ ta was rolled into the payment. When we the lease was ending, we extended the lease by 6mos, and I had to sign an extension contract. They took my old monthly payment, which included NJ tax, and told me I had to pay up-front the add’l 6mos of tax.
So in this case, the leasing company is now making a % more than the first 36mo payments.
The payment stayed the same, just Honda would not recognize that the original lease payment already included the 6.625% sales tax for NJ.
I think this is really an accounting issue, and quiet honestly, the car manufacturers leasing arms should really report the lease payment as two figures, the base lease payment, and the state tax portion of the payment.
Good luck with that. The people at the financing companies don’t know anything. When I moved back to NY from MA in 2013, I had a lease with my MA excise tax rolled into the payment. They abated the MA sales tax, but they refused to stop charging me the excise tax. I explained over and over that it is charged by the city/town on an annual basis, and there will be no bill generated for a car no longer registered there, but it was a long and losing battle over about $35 a month.
Wondering why no one has tried to do a class action lawsuit to recoup all these “illegal” gains😀
One person won’t for fight over $35 but if there are 100k people like that with similar issues…
If a car is transferred in from say, Florida and the monthly (on the contract) is appx $450 per month. But 9 of the final 11 payments have already been payed. Do you just pay the tax on the two payments? (The gentleman transferring the lease would like appx. 1500 to pay for some of the prepaid months).
