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Is tax included in the agreed upon price?

wakawakayowakawakayo Member Posts: 4
edited June 2015 in General
Hi, I'm about to go into a lease agreement but there's something that's been bugging me about how the numbers look. The dealer is telling me one thing but I just want to get the facts straight. I was hoping the good people hanging out at Edmunds.com could help me out

Looking over the contract, I noticed that the agreed upon price in the gross capitalized cost section was different from what we agreed on (+$340). When I brought this up to the dealer, he mentioned that since I opted for the excess wear and tear the price went up (I purchased excess wear and tear for 19 a month). However, that amount should have been included in the additional items (service contracts, etc) that is added on to the agreed upon price (which it was when I subtracted the gross capitalized cost calculation with the agreed upon price). The dealer then says it's because of tax that the agreed upon price rose. Which doesn't make sense to me because 1) he said it was one thing now he's saying another and 2) what kind of tax rate would be applied to 28000 price that would increase it $340 only? This is my first time leasing/buying my car on my own. I want to make sure I'm not being taken advantage of. Can anyone verify that agreed upon price is the whatever price you agreed on plus tax? Any insights?

Thanks!
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  • kyfdxkyfdx Moderator Posts: 236,760
    Tax treatment depends a lot on which state you reside.

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  • wakawakayowakawakayo Member Posts: 4
    Hi kyfdx,

    Thanks for replying! I'm from Los Angeles, CA. I was under the impression that whatever price we agreed to sell at would be the agreed upon price.
  • Mr_ShiftrightMr_Shiftright Member Posts: 64,481
    Cap cost includes the negotiated price of the vehicle plus any add-on fees or taxes that will be financed (not paid in cash).
  • kyfdxkyfdx Moderator Posts: 236,760
    wakawakayo said:

    Hi kyfdx,

    Thanks for replying! I'm from Los Angeles, CA. I was under the impression that whatever price we agreed to sell at would be the agreed upon price.

    California taxes the monthly payment. However, any amounts paid upfront (CAP cost reduction, acquisition fee, excess wear/tear, etc) are taxed upfront..

    I wouldn't think the line item, "agreed on price" would have upfront tax included, but "Gross Cap Cost" certainly could.

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  • wakawakayowakawakayo Member Posts: 4
    We negotiated to X amount. Then I agreed to excess wear and tear (19/month). To my understanding the agreed upon price would be X not X+$340. I'm not sure what sort of tax rate they're using but 340 seems like a fee to me they're trying to hide from me. I don't know if I'm just wrong or being distrustful of the salesman who keeps telling me that it's all been calculated but won't break it down for me. The gross capitalized cost stands at agreed upon price(x+340) + additional fees ($625).
  • wakawakayowakawakayo Member Posts: 4
    By the way, thank you for taking the time to answer. I appreciate the help.
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