sridharkns

Hi - I live in Texas and am considering leasing a 2015 CT200H to be my daily commuter car (I drive ~20mi to work each way). Apparently in Texas, sales tax is collected on the total price of the vehicle at the time of leasing. So I am looking at ~$2000 just in taxes if I do a traditional lease with downpayment and monthly installments. The other option is if I pay for the entire lease upfront, the sales tax is ~$350. It makes sense to go with the single-payment option purely from a financial perspective (yes, I realize the risk I will be taken in the extreme case that the car is totaled in an accident and insurance only pays the wholesale price in the scenario).

?? - That said, are there banks/financial institutions that will finance this amount so I can in turn treat it as a monthly lease (with payments made to the bank/financial institute)?


I was able to negotiate an offer of $7,500 (out of the door price) for 27 months & 12,000 miles/yr and includes Navigation package. I am thinking this is a decent deal as it equates to ~$280/mo.

?? - Is this a good deal or have folks gotten better deals and should I approach other dealerships and negotiate further?

bagwell

so you want to pay for the entire lease up front but finance it? LOL, IDK, never heard of that.

you could always just finance it out to 72 mos and sell if if you don't want to keep it.

sridharkns

Apparently, the singe-payment lease in Texas is more common than you would think.

The way I am looking at it, by leasing, I do not have to worry about going through the hassle of reselling the car after 27 months (either to the dealer or on classifieds). And, I do not have to worry about the heft sales tax

tex2670

If it's stolen or wrecked, insurance is not going to refund the upfront payments.

And, I'm not clear how prepaying the lease payments makes you not responsible to pay sales tax in the amount you would have had to pay if you made the lease payments over time. You may want to double check that.

AORC11

Thanks for the info.

bagwell

oh I've heard of the single payment lease option,
but never heard about financing the single payment lease option

...and I would double check the sales tax issue - I thought you still have to pay the total sales tax.

sridharkns

I reached out to multiple dealers and am pretty sure on the tax component - only pay 1% as taxes.

The banks do not finance leases.

I ended up opening a credit card that gives me the option of interest free 15billing cycles - so in essence I will be paying the $7500 over a period of 15 mo (@500/mo) and enjoy the rest of the 12mos with a free car.

All in all, feels like a pretty good deal on a new car.

bagwell

ahh...cool.

Congrats.

Post up some pics if yo have a chance!

gengar

I have no knowledge of sales tax laws on this topic, but I agree - this does not sound right. Sales tax is not changed by when payments for goods/services are made. I may look into this issue when I have more time, or perhaps someone who already knows will comment.

gengar

So I took a look at the state law governing sales tax as it relates to motor vehicle leases. For the original text, please see Texas Administrative Code Title 34 §3.70.

My interpretation of the portions relevant to OP:

• In Texas, sales tax for a motor vehicle is always due up front when the vehicle is registered - sold or leased is irrelevant except for who technically owes the tax.
• For a lease, the title holder, not the person leasing the car, pays the sales tax (of course, the cost will just be passed on to the person leasing the vehicle in the form of monthly payments)
• Some "leases", such as anything structured as a lease/purchase contract, are considered by the state to be sales and not leases. For sales, the person buying/"leasing" the car owes the sales tax.
• Loan payments themselves are not subject to sales tax.

So as far as the OP, there's no legal rationale for why sales tax would be lower one way or the other. Either there's a misunderstanding or the the salespeople are playing games trying to hide the real taxes/fees involved.

Based on my reading of the code, the only way a different amount of total sales tax would be owed would be if a car is leased (title holder pays all sales tax up front, which as mentioned above is passed on in monthly payments to person leasing the car) and then the person leasing the car decides to purchase the car in a separate transaction at the end of the lease term, in which case he'd have to pay sales tax on the value of that second transaction (no different than, say, buying a used car from the dealer).

sridharkns

@ gengar - appreciate you digging into this.

So on 12/31, before the dealership closes for the night, I signed up for the said CT200H for $6981 for 12K miles/yr and 27 mos. I will be taking delivery tomorrow and will post some pics. I will post the official lease documentation breakdown so we can see the fancy accounting that is used.

sridharkns

So here is the breakdown of the numbers. I am not sure how they ended up with $0 sales tax, but to me the out of pocket costs were $6981.03

gengar

As I mentioned above, no sales tax is what should happen when it is a straight lease - so that's good. (Of course, you are effectively paying the sales tax either way - the cost is just built into the monthly payments.)

sridharkns

Car pics

bagwell

Nice deal, enjoy that new car smell!