Lease Buy Out Question - Any experts here?

[Alan l.]

I reside in NY and when you lease a vehicle you only pay taxes on the lease portion of the car's price. My question is - Lets say your cars residual value at the lease maturity date is 40K but the BMW dealer or carmax is willing to buy or trade in your car for 50K. Since the transaction maybe between BMW Financial or another car dealership (carmax) who pays for the sales tax on the remaining balance of the car? This is a rare occurrence but I've heard of people actually being able to make money by selling their lease car for more than its residual value is set at if the car is well sought after. I'm just curious in the situation above would I have to pay tax on the car, the new dealer or both of us?

Thanks,
Alan

[NoPII]

Originally Posted by Alan l.

I reside in NY and when you lease a vehicle you only pay taxes on the lease portion of the car's price. My question is - Lets say your cars residual value at the lease maturity date is 40K but the BMW dealer or carmax is willing to buy or trade in your car for 50K. Since the transaction maybe between BMW Financial or another car dealership (carmax) who pays for the sales tax on the remaining balance of the car? This is a rare occurrence but I've heard of people actually being able to make money by selling their lease car for more than its residual value is set at if the car is well sought after. I'm just curious in the situation above would I have to pay tax on the car, the new dealer or both of us?

Thanks,
Alan

I've done this many times in WA. Here, and it may be the same there, dealer to dealer transactions aren't subject to sales tax (the end consumer pays it). So, the "payoff" number you get from BMWFS *includes* tax, but you subtract it again to get the number dealer pays.

Eg. my payoff is $50k (I wish). $5k of that is tax. So, if dealer offers me $46k for it in trade, I actually get $1k contribution to new car (or cash back).

[chrisny]

I have traded in 2 leased cars before the lease was up, both to BMW (one was a MB one a BMW) and the dealer does not pay the sales tax. So, my trade-in needed to offset a lower amount than the buyout you can get quoted by BMWFS. The buyout they quote you includes an estimated sales tax amount (I believe they use 6% or something close to that, not your actual tax rate). In both cases, I did actually get a little money back, since the trade-in price exceeded that reduced (tax free) buyout that the dealer had to pay.

[senoromar]

Here in CA, the payoff quote does not include sales tax. Once I were to get the title and then go to dmv to register it under my own name, then DMV would collect tax based on the payoff amount. If I were to trade it in to a dealer, that transaction would be tax-free for both me and dealer purchasing.

If sales tax were already included into the lease, then I suppose the true payoff would be whatever bmw quotes you less the tax for the remaining months? It's so much easier here on the west coast!