Volkswagen Credit causes customer to overpay tax on early lease buyouts by charging them for the full remaining payments, tax on payments and then a “rebate” for the interest. Effectively you pay tax on the not-there interest since they rebate it instead of netting. Or instead of straight chatging for the remaining depreciation where you’ll pay tax on just that.
The actual lease says you owe depreciation and says nothing about a “rebate”. If they instead did charge only the agreed depreciation, early payoff customers would save hundreds of dollars of taxing.
Only the actually charged lease payments is taxable in California, which is why the rebate vs discount/adjustment matters, and why BMWFS and others handle this differently even with the ~same contract language.
Clearly both options are possible and VW/Audi are taking the less customer favorable option.
(they take $21,432.25 * 7.75% tax = $1661 on the “Remaining Future Payments” (instead of the better option being taking $13559.57 ($21.4-$7.8) * 7.75% = $1050.
You also separately need to pay tax on the residual at the dmv.
Note that neither of these are correct based on the contract. They should either be charging sales tax on the entire buyout price or not charging tax at all and tax on the buyout would be due to CA at the time of title transfer.
I was commenting that why would tax be based on Payments when it says Residual.
I’m not saying that it’s 100% right, but he put his tax based on payments when the line says Residual. That’s all.
Yeah they’re lazy enough that they have one line for both Residual/Payoff tax but it’s actually all “Payoff tax” and zero for residual.
And at DMV you’ll need to pay full tax on the residual (otherwise you’d get a reg51 showing amount of sales tax collected on residual but they don’t do that - afaik only dealers in California can collect sales tax on a sale, private party transaction need to pay directly to dmv)
Anyways any arbitration experience / weigh-in would be great
That’s why I’m saying wrong All Around. If you pay taxes on one, you pay on both (according to their text)
Hyundai has a similar issue where they show taxes on RV and you pay it, then when you get to DMV they charge you sales tax again on RV.
Do you have your payment pre tax / post tax, and how many left? It might help explain / disprove this.
Forbs - confirming the tax equal to the lease’s total tax payments * 35 months (less any payment made). And confirming none of it is towards residual and you get zero credit at dmv.
They claim they’re required to collect sales tax on payments but not on residuals/sales, BMWFS is probably more correct that the entire payment is correctly characterized as a sale amount vs splitting into two parts…
So to get back on topic - anyone have experience with arbitration or CA regulatory complaints?
I think the DMV does care since the annual registration fee is on the sales price and they have an artificially low sale price there.
Looks like Small Claims court is your first path AFTER paying it.
Otherwise some kind of Class Action, but if you don’t pay it, you won’t have much standing would you?
And Dieselgate covered the entire country, I think this would only apply in the state of CA.
Nope it’s the exact amount of the rent charge, not a penny more. Also in California rebates are taxable so they can’t do that if they choose to apply a rebate instead of charging just the agreed amount.
They’re making an weird choice to charge full amount + rebate excess, vs charge the actual balance owed.
The tax script is correct for that choice but it’s a not a great choice and it’s puzzlingly why they do it. Maybe there’s some benefit to them, but most likely they’ve just dropped the ball
The most natural thing is charge just the balance owed or discount it, vs rebate
This was the case for me too. The ‘extra sales tax’ was credited during DMV titling/tax/registration. Either way wasn’t an issue in my case because the remaining rent/interest rebated was fairly low in those days since the lease originated in 2019 (and thus the tax n that amount was even lower, less than $25 total I think). If you’re not buying to flip and will actually register and keep the car there won’t be an issue for you since the excess tax paid is considered and deducted from the tax owed upon titling at DMV.
Have you actually gone to DMV to have the vehicle titled and pay the tax yet? You may find this all washes and you don’t actually have an issue. Either way, good luck.
That’s the post I deleted. My updated post stated VW’s rebate may include the refund of the tax. The OP can check the amount of interests in the remaining payment and see if the numbers match.
