General Questions about Leasing Vehicles

dtownfb · August 2007

I'll keep it simple. Make a copy of the title and send the original to the dealer so he can fix it. Please do not try to do anything else. The car is the property of GMAC. You are simply renting it for xx months.

While the title is in your name (by accident), the signed contract (remember that little thing) indicates that it is a lease. And GMAC will be contacting you about it at the end of your contract.

kyfdx · August 2007

Ditto... that sounds like good advice..

They made a mistake, now they want to fix it. What else would you have them do?

joel0622 · August 2007

I would bet my bottom dollar there is a lien recorded on that title. Even if there isn't what you are trying to get some one here to say is an "OK" thing to do is not.

bodble2 · August 2007

When you make a down payment on a lease, is sales tax applicable on the down payment? (I suspect it is, or else that would be a loophole to circumvent sales tax).

kyfdx · August 2007

Tax laws vary from state to state... but, mostly the answer is yes.. for the very reason you stated.

regards,
kyfdx
visiting host

Kirstie_H · August 2007

Otherwise, you'd see a ridiculous number of folks with cash looking to lease. They'd just make a "downpayment" equal to the cost of the entire term of the lease and bingo! No sales tax.

bodble2 · August 2007

I did think it was too good to be true!

bodble2 · August 2007

By the same token, though, if one were to use a trade-in as down payment on a lease, should sales tax be exempt on the value of the trade-in, to mirror the tax treatment applicable if he had used the trade-in on a purchase transaction?

kyfdx · August 2007

You can't get a standard answer to this question. Many states don't offer a trade-in credit on taxes. Some that do, don't offer the credit on leases, because the bank is buying the new leased car, but you own the trade-in.

Some other states allow the credit, no matter if buying or leasing.

Good luck on this one...

volvomax · August 2007

most states charge tax on the lease payment,so there is no tax credit for a trade.
Trade equity isn't taxed like a cash downpayment however.

bodble2 · August 2007

"Trade equity isn't taxed like a cash downpayment however."

How do you mean?

volvomax · August 2007

In most states, a cash downpayment on lease(called de-cap) is taxed at the regular tax rate.
In AZ for example,if you put a $2000 downpayment down on a lease you have to pay $159 in taxes on that amount.
So that $2,000 in essence becomes $1841

If you have a trade w/ $2,000 equity,that $2000 equity can be applied to the lease without taking the tax out.

bodble2 · August 2007

Thanks for the explanation. (So, in essence, you do get a sales tax benefit by using a trade-in as down payment, at lease in AZ)

mb789 · August 2007

Is anyone here familiar with Ohio Tax lease laws -- I read that in Ohio when you lease a vehicle you have to pay the tax upfront; that it is not part of the monthly payment. I would like to get clarification on this and what it would mean if I decide to lease a Wrangler -- does this mean I have to spend several hundred more dollars upfront at the start of the lease? Thanks.

mb789 · August 2007

I bought a car 16 months ago. I am thinking of trading it in and leasing a vehicle. There may be some small negative equity. In a lease, would this get added to the selling price of the new vehicle? Where would it get figured into the equation? I know doing this sounds stupid, but I am just curious.

I could try to sell my current car, and the estimated private party values are within payoff, but I am very cautious about doing this. There is nothing wrong with the car, so I wouldn't feel bad about selling it; I am just too nervous about other people driving my car.

casolorz · August 2007

I am looking to lease a small or midsize SUV. Currently I like the outlander, rav4, rdx, xc90, cx-7, tribeca, etc. With so many choices I am having a hard time making up my mind. I want to keep my payments somewhat low but I also want comfort. I am looking at paying between 300 to 500 a month, 0 down. I would really like to have power seats with memory, bluetooth, automatic AC/lights/wipers, I will also get the tow package so enough power for that will be necessary.
I am basically looking for the perfect balance of price vs comfort. I am also considering buying used, probably CPO but leasing looks more attractive to me since I tend to change cars every 2 years or so.
Thanks for any advice.

bodble2 · August 2007

I would consider something from BMW (ie. X3?), since BMW tends to have the best lease deals, and would meet most, if not all of the your feature requirements. You can probably rule out the RAV4 and CX-7.

Kirstie_H · August 2007

No questions are "stupid," unless you count the multiple posts by a single person who keeps asking whether it's a good idea to trade in a 2-month-old vehicle, and won't take "no, absolutely not" as sound advice

On a lease, you negotiate the purchase price just like you would if you were buying. This means that the negative equity from your trade would be rolled in to the purchase price. Your monthly payment would reflect this negative equity, just like your monthly payment would if you were financing a purchase. It's really no different.

You should pop over to our Real World Trade-in Values discussion and post details on your current vehicle. Several members who are in the biz can tell you what to reasonably expect to get on trade-in.

kyfdx · August 2007

In Ohio, the tax is paid upfront to the state. That doesn't mean that you have to pay it upfront, however.

You can just add it on to your CAP cost and pay it over the lease term. That is the best way to do it. You do have some small increase in the finance charges, but if something happens to your car, early in the lease term, you haven't lost all of that tax money.

regards,
kyfdx
visiting host

bodble2 · August 2007

Somewhat off-topic here, but is "negative equity" not a good thing? Negative equity means market value is less than pay-out (residual) amount, correct? Does that not mean you've been paying less on the lease than you should, since your lease payments, in part, is payment for depreciation?

Kirstie_H · August 2007

Good question - easiest way to explain is
negative equity = upside down = owe more than it's worth.

If I have a car that is worth $20,000 as a trade-in (market value), but I still owe $22,000 on the loan, then I have $2,000 negative equity. If I trade it in, the dealer will add that $2,000 to the price of whatever vehicle I purchase, meaning I will be financing $2K more than the new car is worth...
OR
I can pay off the $2,000 in negative equity myself.

This applies mainly to purchases. Leases are weirder animals. If you turn in the vehicle at the end of your contracted lease term, there is no equity, negative or postive. You're out. You're done. If you want to turn in the car early, it can get ugly - sometimes you have to pay all of the remaining lease payments PLUS the residual amount in order to be done with the vehicle. Sometimes, if you buy or lease a vehicle from the same manufacturer, you can get a bit of a break on this, but not always.

If you pay too little on your lease payments, after awhile the finance company will likely do a repo!

bodble2 · August 2007

"If you pay too little on your lease payments, after awhile the finance company will likely do a repo!"

Actually, when I said "you've been paying less on the lease than you should", I didn't mean paying less than the contracted monthly payments. I meant the residual was set too high in relation to actual depreciation. But I understand what you said about "negative equity" applying more to a purchased, rather than leased, vehicle.

Kirstie_H · August 2007

Yeah, if you do all of the things that the contract says you're supposed to do (right payment, under the mileage limit, keep it til the term is up), there's no such thing as negative equity... which is why many people who don't put on a ton of miles and who like to get a brand new vehicle every few years choose leasing instead of purchasing.

If the residual value (i.e., your purchase price at lease end) is set too high (meaning that when you turn it in, the market value is less than the residual value), then that's someone else's problem, not yours.

(I realize that you may already understand this, but now the detail is here for anyone else who may have the same question)

kyfdx · August 2007

Negative equity at the end of the lease is a great thing!! Assuming that you are within your contractual limits, that means you made out better by leasing instead of buying!!

It's not such a good thing, if you are looking to get out of your lease early. If one thinks that they might not be able to fulfill the terms of a lease, then they shouldn't lease.

regards,
kyfdx
visiting host

casolorz · August 2007

Interesting, I will be sure to check it out. I would love to get an RDX just because the dealer is the same as my jag and the service guy is great. I have often had trouble with service guys in the past so thats pretty important to me.

casolorz · September 2007

do any of the car companies offer a 1 year lease?

casolorz · September 2007

What are the best small SUV offers out there right now? I don't really care if its a kia or a bmw, I will endup getting it fairly loaded eitherway and my payments can go as high as 450/month but I do want a fairly good bang for the buck!

bodble2 · September 2007

Good bang for the buck? Probably something from the Koreans, or perhaps the Mitsubishi Outlander.

cccompson · September 2007

You can lease a vehicle for any period but the odds of ever finding a one year lease with remotely favorable terms is very long indeed due to heavy initial depreciation.

I once stumbled into such a deal - '95 Jeep Grand Cherokee Laredo with an MSRP of $28,xxx for $299/Mo. for 12 months/12,000 miles with $995 out of pocket due at inception. Supposedly, the only reason for the deal was that Chrysler (or the dealer) had already cut a deal to ship 'em to the Mideast a year later.

bodble2 · September 2007

Some oil baron in the mid-east wanted used Jeeps? :confuse:

im_brentwood · September 2007

Saves a fortune on Import taxes....

bodble2 · September 2007

I just didn't think money is a concern with those guys. :P

british_rover · September 2007

It is when it comes to taxes. They are always looking to reduce the amount of money going out for taxes.

I sell a couple of Used Range Rovers a year to people who are going to export them. Depending on the country they can pay half the taxes or even more by buying a one or two year old car vs a brand new one. This one guy was telling me that when he exports a car to Dubai, at least I think it was Dubai he has to pay 100% duty on the purchase price of the car if it has less then such and such miles. He only has to pay 50% duty on cars with higher mileage.

cccompson · September 2007

Ah, well, import taxes would explain it. Thanks, I never understood what was going on.

lucymagoo · September 2007

I have been looking to buy a new to me/used vehicle. I came across a "private owner" selling a vehicle. The problem is is that they are leasing the car. They have 2 years left on the lease but are trying to sell it. How does this work? I am so confused on the process. He told me we could go transfer the title to me. can anyone help?? Is this possible. What are the "be aware ofs"..??

volvomax · September 2007

Yes,you can buy a leased vehicle.
It is the same as buying a vehicle with a lien from a bank loan.
With one exception.
Obvioulsy, the bank has to be paid off,so make sure that happens.
Also, on leases there is usually sales tax on the payoff to consider.
Make sure you have all the numbers sorted out.

bodble2 · September 2007

But can lucy not simply take over the lease, and not buy the vehicle outright per se? I see ads all the time "to take over remaining lease...."

volvomax · September 2007

That is an option(usually).
The lease company has to be on board,and you have to be creit worthy to assume the lease

jenyoung2007 · September 2007

Hi there. I have a Mercedes C230. I hate it. It's too low to the ground and I keep ruining the spoiler due to curbs

. Anyway, I want to get out of my lease early. MB says I owe $6448 to get out. What's the best way of handling this? Is getting another MB my best option?

I just want a new car (really I'd prefer something other than a MB) for about $500 per month which is my current payment. I have no idea how to calculate what the cost of the car would be to get my payments at that rate and roll in my negative $6k. Bleh. By the way, I drive 15-20k per year. So if there's a way I could get in a new car and NOT lease, I'd love it.

Thanks in advance!

tidester · September 2007

Why don't you just hang in there for the last 12 months then buy into a new vehicle without the burden of financing your existing $6,000 debt?

tidester, host
SUVs and Smart Shopper

jenyoung2007 · September 2007

I think I'm going to have to. The other IMPORTANT thing I left out of the post is that I am at my mileage allotment now. Eek. I guess it's 6 in one, half dozen in the other.

tidester · September 2007

I am at my mileage allotment now.

Ouch!

tidester, host
SUVs and Smart Shopper

jenyoung2007 · September 2007

Thanks for your reply- I accidentally neglected to thank you in my previous response

volvomax · September 2007

There is no simple answer for this.
If you don't want to lease, $500/mo is roughly $25,000 financed for 5 yrs.
Tax license,inequity,everything.
So, you have to buy a car in the teens in price,then add your $6k to Mercedes.

Since you are driving a Mercedes,I don't think you are going to want a sub $20k car.

Otherwise,try to find a car w/ decent lease incentives.

peetert · September 2007

Looked for this topic, found one question from this spring, but no reply, so I'm gonna try my luck.

We're looking to get into a newer car and one of the options I am considering is leasing a higher end used vehicle. I've looked around but cannot find much information on this topic. What I'm really trying to do is figure out if this might be a viable option for us. My guess is alot of the depreciation has already been eaten up, so the depreciation won't be that bad, but I'm sure there are other gotcha's, like higher interest rate & money factor.

A real-world example would be great. We're contemplating an off-lease XC-90 for comparisions sake.

Thanks

Peeter

volvomax · September 2007

I think I answered your question in another forum.
Bottom line is that new car lease programs are far more aggressive.
The residuals are higher and the money factors lower on new cars.
On used cars,you are paying bank rate money factors and the residuals stink.

cccompson · September 2007

Volvo is offering a good lease deal right now on the '08 XC 90:

MSRP - $44,725 for $369/Month for 24 months with about 3K down with 10.5K miles per year.

I called a local dealer about this yesterday to get further particulars but he was, for whatever reason, unwilling or unable to provide the cap cost, money factor, or residual figures on this offer.

volvomax · September 2007

Hmm. I thought it was $399 + tax w/ $3869 due,plus local taxes and registration fees.
It is a new offer,so he may not have the particulars,esp if you did not quote it correctly.

cccompson · September 2007

No, the figures were directly from a (very large) ad they ran in the local paper yesterday. Actually, the same offer shows up here on edmunds (incentives) so it's a Volvo offer. It's possible, though, that this could be a regional thing.

Interestingly, during the call he asked for my email to send the figures. His claimed reason (today) for not so supplying the numbers was that his finance manager would do so only when I came to the store.

Dealers that play games like that will have to find their customers elsewhere.

I did visit a competitor today to look one over - nice car -and confirmed the offer.

im_brentwood · September 2007

Probably because Max is in AZ and CC is in Ohio IIRC.

Volvo is the King of regional lease programs.. I remember someone out in I think it was the west coast flip out because they couldn't get the S70A Sign and Drive deal that we had in the NYC metro area back in 98.. S70A with cold weather pkg, $299/mo+ tax, only plates due at signing... waived 1st pmt, bank fee, sec dep, etc..

In Missouri, for example, the deal on the same car would be like $340 with 1st payment upfront, but they had 3.9apr and we didn't.

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