Lease Termination Options

[Darren]

If I lease a LEAF and need to get out of it before the end of the 36 months, what are my options?

My dealer is telling me that it works much like a finance when you have a buyout at each step of the way but the main difference with the LEAF is that on a finance the payoff starts at the purchase price but the lease starts at purchase price less $7500. Does it really work that way?

 

[evnow]

Sounds correct.

 

[Darren]

If that is true, why would anyone finance? It seems that you could lease the car on day one without paying sales tax (because tax on a lease is calculated each month). On day two you could take a loan for the purchase price less $7500 and pay off the lease. This scenario would end up with a much lower monthly payment than if you had financed the entire purchase price.

 

[AmarilloLeaf]

If that is true, why would anyone finance? It seems that you could lease the car on day one without paying sales tax (because tax on a lease is calculated each month). On day two you could take a loan for the purchase price less $7500 and pay off the lease. This scenario would end up with a much lower monthly payment than if you had financed the entire purchase price.

Not in Texas. In Texas, we pay ALL of the sales tax on day 1 and it is added to the total transaction price. We pay the tax again on the residual.

Thus, leasing an auto in Texas is less preferred.

 

[LEAFer]

If that is true, why would anyone finance? It seems that you could lease the car on day one without paying sales tax (because tax on a lease is calculated each month). On day two you could take a loan for the purchase price less $7500 and pay off the lease. This scenario would end up with a much lower monthly payment than if you had financed the entire purchase price.

Won't work. You do have to pay sales tax ( I am not addressing TX or other states like it ) on the $7,500 that you benefit from on the lease portion. Then when you buy-out the lease you pay the sales tax on the rest. The only advantage is that you benefit from the $7,500 immediately instead of waiting for tax filing day (federal $7,500 tax credit). The lease has some disadvantages due to some extra fees. Several other threads address the details.

Nice try ... sorry

 

[smkettner]

You are probably upside down the entire way during the lease. So your option is to call the leasing company or the dealer and ask for the pay off to turn it in early. It would be a lot at first and approach zero as you go full term. Or you just trade it in on something else and the negative equity is rolled into the next vehicle loan or lease. And you could also try to assign the lease to another willing party assuming that is OK with the Lessor.

 

[Darren]

If that is true, why would anyone finance? It seems that you could lease the car on day one without paying sales tax (because tax on a lease is calculated each month). On day two you could take a loan for the purchase price less $7500 and pay off the lease. This scenario would end up with a much lower monthly payment than if you had financed the entire purchase price.

Won't work. You do have to pay sales tax ( I am not addressing TX or other states like it ) on the $7,500 that you benefit from on the lease portion. Then when you buy-out the lease you pay the sales tax on the rest. The only advantage is that you benefit from the $7,500 immediately instead of waiting for tax filing day (federal $7,500 tax credit). The lease has some disadvantages due to some extra fees. Several other threads address the details.

Nice try ... sorry

I am fairly certain that in California you pay the sales tax on each payment but I can definitely see them hitting you with the sales tax on the payoff amount.

Can you point me to some threads on taxing the $7500? I will do some research to see what I can come up with.

Also, I seem to be remembering that the lease origination fee is $595. Wouldn't my scenario only incur the $595 penalty + any difference between the money factor and what you would have paid in interest through financing?

 

[Darren]

You are probably upside down the entire way during the lease. So your option is to call the leasing company or the dealer and ask for the pay off to turn it in early. It would be a lot at first and approach zero as you go full term. Or you just trade it in on something else and the negative equity is rolled into the next vehicle loan or lease. And you could also try to assign the lease to another willing party assuming that is OK with the Lessor.

It can't possibly be more than a $7500 penalty, can it?

 

[Spies]

Darren, assuming you are in California, you will pay sales tax on the entire "Capitalized Cost Reduction" which will include the $7,500 federal credit and whatever portion of your payment at lease singing that reduces what is owed on the lease in addition to sales tax on payments and sales tax on the residual if bought out.

In addition to the $595 "acquisition fee" there is also a $300 "purchase option fee" and keep in mind if you manged to negotiate a price lower than MSRP it will not apply to the residual payment since it is computed at MSRP.

Spreadsheets for trying different scenarios http://www.mynissanleaf.com/viewtopic.php?f=23&t=1067
More analysis on buy vs lease http://www.mynissanleaf.com/viewtopic.php?f=23&t=1640

 

[Darren]

Darren, assuming you are in California, you will pay sales tax on the entire "Capitalized Cost Reduction" which will include the $7,500 federal credit and whatever portion of your payment at lease singing that reduces what is owed on the lease in addition to sales tax on payments and sales tax on the residual if bought out.

In addition to the $595 "acquisition fee" there is also a $300 "purchase option fee" and keep in mind if you manged to negotiate a price lower than MSRP it will not apply to the residual payment since it is computed at MSRP.

Spreadsheets for trying different scenarios http://www.mynissanleaf.com/viewtopic.php?f=23&t=1067
More analysis on buy vs lease http://www.mynissanleaf.com/viewtopic.php?f=23&t=1640

I think I am following you. Let's say that I paid MSRP, then I would pay tax on MSRP regardless of what I put down or the $7500. I am in California.

I am thinking I would likely pay taxes on the $595 + $300 as well.

Ignoring the immediate refinance thought, is there a point in the lease where you could sell it/ buy-out the lease and basically be into it the same amount of money as if you had financed? I am not sure if that made any sense at all but hopefully you will get the gist of it.

Thanks.