Question about Sale Tax for a vehicle lease

spidpooy

I want to capitalize Sale Tax in the lease. However, I am not sure how to calculate that. In out State sales tax is due as an up-front tax on the total lease price.
The tax calculation formula is like this:

Sale Tax Due at sign-in = (Sale Price - Rebates - Residual - Trade-in + Interest) * Tax_Rate

If I capitalize this Sale tax, how much would be the added interest on sale tax ? Do I have to pay Tax on this added interest ?

Our state does not charge tax for GAP or Insurance and I know the GAP insurance is included in my lease. However, I don't know how much of the monthly payment is for GAP insurance...

kyfdx

spidpooy said:

I want to capitalize Sale Tax in the lease. However, I am not sure how to calculate that. In out State sales tax is due as an up-front tax on the total lease price.
The tax calculation formula is like this:

Sale Tax Due at sign-in = (Sale Price - Rebates - Residual - Trade-in + Interest) * Tax_Rate

If I capitalize this Sale tax, how much would be the added interest on sale tax ? Do I have to pay Tax on this added interest ?

Our state does not charge tax for GAP or Insurance and I know the GAP insurance is included in my lease. However, I don't know how much of the monthly payment is for GAP insurance...

What state?

If GAP insurance is included, it's included. There isn't a separate amount for it, unless you are going with a manufacturer that doesn't include it.

spidpooy

Sorry state of MN

Michaell

spidpooy said:

Sorry state of MN

If MN calculates the sales tax for a lease up front, you have the option of paying it at lease inception or adding it to the cap cost, where it is subject to interest. The amount of interest isn't much, however.

spidpooy

Thanks @Michaell for your prompt reply. If I decided to add the tax in the cap cost, how can I calculate the additional interest ? Should I just multiply monthly tax by MF to get monthly interest on capped sale tax ?

Michaell

spidpooy said:

Thanks @Michaell for your prompt reply. If I decided to add the tax in the cap cost, how can I calculate the additional interest ? Should I just multiply monthly tax by MF to get monthly interest on capped sale tax ?

No, just recalculate the entire lease payment with the new cap cost (selling price + fees + taxes - minus down payment, if any).

spidpooy

Michaell said:

spidpooy said:

Thanks @Michaell for your prompt reply. If I decided to add the tax in the cap cost, how can I calculate the additional interest ? Should I just multiply monthly tax by MF to get monthly interest on capped sale tax ?

No, just recalculate the entire lease payment with the new cap cost (selling price + fees + taxes - minus down payment, if any).

That is funny, Sorry if I am not that smart. But I think Excel will report an error if I do that because to calculate tax I need to include interest, on the other hand, to calculate interest, I need to include tax. Sounds like a circle ;-)
Our state charge sale tax on (Selling price + interest - rebate).

spidpooy

Can some one help me to understand Capped Sale Tax logic in state of Minnesota ? I just want to understand how dealers calculate sales tax if I decided to roll it into the cap cost. I have following quotes from dealers which make no sense at all:

1- MF 0.00120, 36 month payments of $276.47 includes total sale tax of $785
2- MF 0.00071, 36 month payments of $346 includes total sale tax of $1897
3- MF 0.00071, 36 month payment of $372 includes total sale tax of $2036

Sale tax rate in here is max 7.875%... to me only #1 make sense. I have no idea how dealers in #2 and #3 calculate sale tax. I am reading these numbers from their printed quote that should be prepared with their everyday lease program.

One more question, what happen if I roll in the sale tax into the cap cost and vehicle gets totaled after a while ? Do I need to continue pay monthly sale tax ?

kyfdx

spidpooy said:

Can some one help me to understand Capped Sale Tax logic in state of Minnesota ? I just want to understand how dealers calculate sales tax if I decided to roll it into the cap cost. I have following quotes from dealers which make no sense at all:

1- MF 0.00120, 36 month payments of $276.47 includes total sale tax of $785
2- MF 0.00071, 36 month payments of $346 includes total sale tax of $1897
3- MF 0.00071, 36 month payment of $372 includes total sale tax of $2036

Sale tax rate in here is max 7.875%... to me only #1 make sense. I have no idea how dealers in #2 and #3 calculate sale tax. I am reading these numbers from their printed quote that should be prepared with their everyday lease program.

One more question, what happen if I roll in the sale tax into the cap cost and vehicle gets totaled after a while ? Do I need to continue pay monthly sale tax ?

https://dps.mn.gov/divisions/dvs/forms-documents/Documents/LeasedVehicles.pdf

Pretty clear explanation on that document of what's taxable.

It's basically the sum of the lease payments, plus any upfront amounts, multiplied by the tax rate.
But, it's all due at lease signing. You can pay it, or have it added to your CAP cost. Either way, the state gets their money immediately.
Why your three quotes are wildly different, I can't say.

There is no monthly sales tax. If you total your car, all of the tax has already been paid upfront.