leasing a car? Please give your opinion

[TJones]

You're saying that the total tax due is (Cost of Car) * (Tax Rate) * (100-(Residual %)), right?

Yes, you have the FULL amount of tax in the purchase price, but, the rest of your tax amount on a $30k car, after the 36 payments, is in that residual amount of 51% or $956.25, you have only paid 49% of the tax amount by the 36th month. You are making 36 payments on the agreed price amount + TT&L. You don't pay your TT&L first then start making payments towards the car.

$30,000(price of car) + $1875(tax) + $180(title & license)= $32,055(100%)

Residual after 36 months @ 51%= $15300, Residual is based off the MSRP of the car only, not MSRP + TT&L.

Now, if you decide to keep it and refinance, you will only pay taxes on $15300, that is the guaranteed amount by the bank. You have only made payments on 49% of price plus TT&L for 36 months.

I will say it another way, you only pay 49% of the taxes over 36 months on an MSRP of $30000 if it has a residual of 51% .

Edited July 31, 2007 by TJones

[jm1fd]

$30,000(price of car) + $1875(tax) + $180(title & license)= $32,055(100%)

Residual after 36 months @ 51%= $15300, Residual is based off the MSRP of the car only, not MSRP + TT&L.

Now, if you decide to keep it and refinance, you will only pay taxes on $15300, that is the guaranteed amount by the bank. You have only made payments on 49% of price plus TT&L for 36 months.

I will say it another way, you only pay 49% of the taxes over 36 months on an MSRP of $30000 if it has a residual of 51% .

So then this site is just all wrong?

[TJones]

So then this site is just all wrong?

That is for second party leasing companies like Apple lease, that is not for people who buy at Dealerships, get your facts straight. Do you read what you actually link to ? Again, you aren't comparing apples to apples, we are talking about TRADING at dealerships, BUYING at Dealerships, not private party sales or second hand lenders.

Geez Louise, I bet you are one of those people who forget to breathe sometimes and have to be reminded.

Quit trying to find a loophole and just admit you are WRONG! Leasing is NOT a bad deal, that is why the programs are designed for certain types of drivers, if you can adhere to the terms of the lease, you will be just fine. I will agree that leasing is NOT for everyone if you drive over the miles or can't maintain the vehicle. I have leased 2 SUVs, and came out smellin like a rose on both, because of the market drop on large SUVs when it was time to return them was crazy. I've been with the world's largest retailer in the car business for 9 years and have sold and managed several brands , you are giving people FALSE info, and you just need to stop while you are behind JM1.

Edited July 31, 2007 by TJones

[jm1fd]

That is for second party leasing companies like Apple lease, that is not for people who buy at Dealerships, get your facts straight. Do you read what you actually link to ? Again, you aren't comparing apples to apples, we are talking about TRADING at dealerships, BUYING at Dealerships, not private party sales or second hand lenders.

So the tax law is different for leasing companies that offer their products through dealerships? I didn't see anything on that site which indicates that the tax laws differ based on the company from which you lease a car. Now if you're referring to a lease/purchase or balloon payment arragement, then that is something totally separate from a lease which is taxed slightly differently than a lease, but I would expect that you, mister high and mighty CEO of the galaxy's largest car dealership for three-thousand years, would know that there is a distinct difference between the two products. The state of Texas itself makes no distinction as to how the vehicle is leased either.

Quit trying to find a loophole and just admit you are WRONG! Leasing is NOT a bad deal, that is why the programs are designed for certain types of drivers, if you can adhere to the terms of the lease, you will be just fine. I will agree that leasing is NOT for everyone if you drive over the miles or can't maintain the vehicle. I have leased 2 SUVs, and came out smellin like a rose on both, because of the market drop on large SUVs when it was time to return them was crazy. I've been with the world's largest retailer in the car business for 9 years and have sold and managed several brands , you are giving people FALSE info, and you just need to stop while you are behind JM1.

I have no problem in being wrong, but I've yet to see anything to indicate that I am wrong. From what I've seen thus far you're just a typical hyperbole spewing used car salesman.

Edited July 31, 2007 by jm1fd

[TJones]

So the tax law is different for leasing companies that offer their products through dealerships? I didn't see anything on that site which indicates that the tax laws differ based on the company from which you lease a car. Now if you're referring to a lease/purchase or balloon payment arragement, then that is something totally separate from a lease which is taxed slightly differently than a lease, but I would expect that you, mister high and mighty CEO of the galaxy's largest car dealership for three-thousand years, would know that there is a distinct difference between the two products. The state of Texas itself makes no distinction as to how the vehicle is leased either.

I have no problem in being wrong, but I've yet to see anything to indicate that I am wrong. From what I've seen thus far you're just a typical hyperbole spewing used car salesman.

Talk about typical, I totally expected that response from someone like yourself that obviously has no clue what he is talking about, and thinks he does because he knows the car business now that he's bought more than 3 cars in his lifetime. You are quite the professional I see. I understand that buying a new car isn't in everyone's budget, so you might get a little jealous at those who can actually do a lease.

So, now you wanna tell the readers here, that the website you linked to ISN'T about secondhand lenders such as Apple leasing and Prolease here in Houston. Those companies have their leases structured to where YOU, the consumer, pay all the taxes upfront, that's how they make THEIR money, while they come buy the car you want, for CASH from ME, the dealer. You are seriously NAIVE to this whole thing cheif. Leasing companies don't offer THEIR products through us, they are their own business entity, get it straight Mr. Knownothing.

Outside Leasing Companies are in NO WAY affiliated with the Dealership. If you came to a Dealership and leased a car, you would not be hooked up with Apple or Prolease, you would be hooked up through GMAC, NMAC, FMCC, etc. So, YES, it is totally different.

I understand it is hard for you to see the truth, and admit you're wrong when you have blinders on. There is a little law called TRUTH IN LENDING, and if I didn't disclose it on every deal, and have both the buyer and the financial rep. (ME or other associate) sign said paperwork, and a customer finds flaws or has been lied to about how the financing works, then who do you think gets sued ? I am sure you are familiar with this paperwork except when you are selling houses with cracked foundations, isn't that right ?

Man, it really is like my Father used to say. "Don't argue with idiots... because they will just drag you down to their level and then beat you with experience."

Edited July 31, 2007 by TJones

[jm1fd]

The State of Texas says the following: "A motor vehicle purchased in Texas to be leased is subject to motor vehicle sales tax. The lessor is responsible for the tax when the vehicle is registered in the lessor's name." Here's another link stating the same thing, just in case you didn't like the first one.

This is quite simple. Where does the $$ for taxes come from? Does the lessee pay for it, or does the lessor pay for the sales tax on the residual value out of the goodness of their hearts?

[TJones]

The State of Texas says the following: "A motor vehicle purchased in Texas to be leased is subject to motor vehicle sales tax. The lessor is responsible for the tax when the vehicle is registered in the lessor's name." Here's another link stating the same thing, just in case you didn't like the first one.

This is quite simple. Where does the $$ for taxes come from? Does the lessee pay for it, or does the lessor pay for the sales tax on the residual value out of the goodness of their hearts?

I like the first one just fine, you just don't understand what it means. A contract for a car is drawn up and a check is cut by the bank guaranteeing the loan, a lease is STILL a loan, the taxes are paid out of the check that has been cut to the selling agent in order to cover the full selling price of the loan, and the state gets it's taxes paid from the dealer who provides the title work and goes away. Now, it is up to YOU to pay back the loan, which included the tax amount, to the selling agent or bank who got you that loan. A secondhand agent will probably ask for the tax money upfront, that is how they make a profit. Dealerships who have there own banks, i.e brandname financials like GMAC, and FMCC are happy to spread the taxes out over the length of the loan, as they are the guarantor and know that they will get the car back and sell it back to either you, or the next person that comes along. Seocndhand lenders don't have the luxury, as they have had to pay cash for the car , and don't have the built in financials and holdbacks that dealers have

Why is it so hard for you to understand ? If you don't qualify for a lease from a dealer and you have to do a conventional loan at a 60 month term, do you pay all the taxes up front, or do you roll them into the payment ? A check is cut for the full amount to the dealer and the taxes are paid to the state, all at once, while the consumer pays back over time. Correct ?

That is the same way it works with the lease, the difference is there are terms and conditions of that lease, but paying all taxes up front is NOT one of them. Unless it is a condition to be able to do business with either the fly by night company you chose to lease from, or a reputable dealer, who doesn't charge such ridiculous fees up front.

Edited July 31, 2007 by TJones

[jm1fd]

I see why this has been so debate-tastic. I never intended to debate (nor said) that the taxes had to be paid up front....just that the full cap cost of the vehicle was taxed, and that presumably the lessee paid for all those taxes at some point.

When the car is leased however, the financial arm of the brand will pay all the taxes up front for the lessee, while the lessee pays it back over the term. The rest of the residual tax will be paid back to the financial arm, when the car is refi'd or sold outright.

Great. So we've managed to agree that taxes have to be paid to the state up front on the full cap cost, right? Now my only question is, from whose pocket does the "rest of the residual tax" (the 51%) come from? That of the lessee? If so, then my original contention stands.....

If you don't qualify for a lease from a dealer and you have to do a conventional loan at a 60 month term, do you pay all the taxes up front, or do you roll them into the payment ? A check is cut for the full amount to the dealer and the taxes are paid to the state, all at once, while the consumer pays back over time. Correct ?

Correct. But all the tax $ is paid for by the buyer.

That is the same way it works with the lease, the difference is there are terms and conditions of that lease, but paying all taxes up front is NOT one of them.

Again....never said all the taxes were due up front...just that the full cap cost was taxed...not (CapCost-Residual) like in other states. Edited July 31, 2007 by jm1fd

[gwilson]

All bickering aside...

If you plan on buying a vehicle with a high residual value and owning it for a relatively short period of time, leasing is the way to go.

[TJones]

I see why this has been so debate-tastic. I never intended to debate (nor said) that the taxes had to be paid up front....just that the full cap cost of the vehicle was taxed, and that presumably the lessee paid for all those taxes at some point.

That's just it, you presumed too much. The lessee, will eventlually pay back all the taxes paid by the lessor if he/she decides to buy the vehicle outright or refinance. If the lessee, turns the car back in, that lessee has only paid 49% of the taxes.

Great. So we've managed to agree that taxes have to be paid to the state up front on the full cap cost, right? Now my only question is, from whose pocket does the "rest of the residual tax" (the 51%) come from? That of the lessee? If so, then my original contention stands.....

No, it will not come from the lessee if he/she decides to turn the car back in. The NEXT owner/buyer, will be the one to pay the residual taxes, out of their loan, based on what the car sells to him/her for , and that buyer may actually buy the car for less than the residual is worth, meaning the bank lost a little money on the tax scale.

Correct. But all the tax $ is paid for by the buyer.

Only if the original lessee decides to keep the car until it is paid off, which it will not be in 36 months on a lease.The tax is slowly being paid back by the buyer over the length of the term, but they don't pay it all up front, and they won't pay it all back in the short 36 month term.

Again....never said all the taxes were due up front...just that the full cap cost was taxed...not (CapCost-Residual) like in other states.

You did say that, isn't that why you posted those links ? You assumed that all the taxes were paid by the lessee within those 36 months, or that they had to be paid "upfront" to the leasing agent. The full tax amount is always paid by the leasing agent when your loan/lease is approved, the bank cuts them the check for the full amount of the loan, and they break off the piece that goes toward the taxes.

Edited July 31, 2007 by TJones

[jm1fd]

You did say that, isn't that why you posted those links ? You assumed that all the taxes were paid by the lessee within those 36 months, or that they had to be paid "upfront" to the leasing agent. The full tax amount is always paid by the leasing agent when your loan/lease is approved, the bank cuts them the check for the full amount of the loan, and they break off the piece that goes toward the taxes.

I posted the links because they illustrated that the full cap cost is taxed, and that presumably it would be repaid over the term of the lease....it makes no sense that the lessor would pay for part of the taxes.

I'm still trying to reconcile what you're saying with what the law in those links says. The law in those links says that if the lessor sells the car to the lessee at the end of the lease then that is another taxable event over and above the original tax on the cap cost. So the lessor would pay taxes on $30k and then the lessee would pay taxes again on the residual value $15k (for the sake of simplicity) if they exercised the option to buy later. So basically you'd be paying taxes on $45k if you exercised the option to buy at lease end. Am I misreading the law? Are leasing companies defrauding the state? Has the law changed recently?

[TJones]

I posted the links because they illustrated that the full cap cost is taxed, and that presumably it would be repaid over the term of the lease....it makes no sense that the lessor would pay for part of the taxes.

I'm still trying to reconcile what you're saying with what the law in those links says. The law in those links says that if the lessor sells the car to the lessee at the end of the lease then that is another taxable event over and above the original tax on the cap cost. So the lessor would pay taxes on $30k and then the lessee would pay taxes again on the residual value $15k (for the sake of simplicity) if they exercised the option to buy later. So basically you'd be paying taxes on $45k if you exercised the option to buy at lease end. Am I misreading the law? Are leasing companies defrauding the state? Has the law changed recently?

If you go to an outside leasing agent, yes, you will get knocked 1 and 1half times with those guys. But, again, that is how they make their money. It is not Texas Law, it is how those types of companies do business, and they write their contracts accordingly, they aren't breaking any laws, it is just the cost of doing business with them. Dealerships don't do leases like that, nor do we have any kind of "set up" in place with those companies either. They pay cash for their cars they buy from us.

If you buy from a dealership, you will NOT pay the full tax amount off in 36 months, you will pay the unresidualized amount of 49%. If you decide to turn the keys in and walk away, the NEXT buyer will wind up paying the rest of the taxes, depending on how much he pays for the vehicle. The next buyer, if he is a shrewd consumer like yourself, could conceivably purchase the car for less than the residual value, thus paying less taxes. The bank isn;t worried about that little amount of loss though, because they have already made their money off the interest earned on the previous lease.

OK, I think you have it now, Now it is time for Vodka and Big Hugs ! ! !

Edited August 1, 2007 by TJones

[102IAHexpress]

Leasing a vehicle can be a good deal if one adheres to the lease terms. But I could never get my brain to grasp the notion of paying the sales tax for a vehicle that I legally do not own.

[jm1fd]

If you buy from a dealership, you will NOT pay the full tax amount off in 36 months, you will pay the unresidualized amount of 49%. If you decide to turn the keys in and walk away, the NEXT buyer will wind up paying the rest of the taxes, depending on how much he pays for the vehicle. The next buyer, if he is a shrewd consumer like yourself, could conceivably purchase the car for less than the residual value, thus paying less taxes. The bank isn;t worried about that little amount of loss though, because they have already made their money off the interest earned on the previous lease.

*shrug* I just can't fathom a business being so generous as to pay half-ish of your sales taxes. I mean most medium-large companies will chase down savings of PENNIES....much less hundreds of dollars on every transaction.

[TJones]

Leasing a vehicle can be a good deal if one adheres to the lease terms. But I could never get my brain to grasp the notion of paying the sales tax for a vehicle that I legally do not own.

How many cars have you bought and paid a monthly payment on until you have paid it off ? If you traded it in before you paid it off, you still paid the taxes on that car right, and you didn't "own" it, the bank still had the title, with your name on it, but they were the lienholder.

That's another myth, you DO own the vehicle, you are responsible for maintaining insurance on it. The title is in your name with a lienholder on it, just like a regular purchase. The thing is that when the term is up, you have 3 options, but if you just want to walk away from the car, you HAVE to give it back to who you bought it from, if you do not want to continue ownership.

You can trade out of the lease if you want. You can private sell it if you want. You can pay it off early if you want. A lease is just another tool to help those that are already in a negative equity position to have a way to get out from under their current vehicle and not be "upside down" again, when it comes time to trade in. But of course, the negative equity is gonna be financed into that lease term, just like it would be in a conventional loan, but without the risk of being "upside down".

BTW, I am not trying to be combative here, I am trying to explain why leases aren't as OMINOUS as everyone seems to perceive them. I am always happy to help ANY Haif member if they have a car question.

EDIT: JM1, the bank won't lose, they aren't paying half the taxes, they will make their tax money back with the resell of the car, the taxes that they paid out will eventually get paid by that resell, that is where the other 51% is made up. It is the car business, I make a pretty good living at it. I don't always win on deals with the customer. It is impossible to win them all, but I don't lose too many. Will a dealership sell a car that might lose money, you bet they will. We lose $1,000s at the auction off of merchandise that just doesn't sell sometimes. My wife says I am Waaaaayyyyyyyy too nice to be in this business. I will tell you that I am the 10% rule in this business. Nice guys are hard to find, people that will actually go out of their way to help get you the car you want. Tomorrow, I am gonna drive 100 miles to get a guest an SUV, that there is only ONE like it in the region right now. I do this to make the guest happy, and the next time he is ready he will most likely buy from me, and he will tell his friends what I did for him, and THEY will possibly want that kind of service also.

Edited August 1, 2007 by TJones

[RedScare]

This is incorrect. The leasing company owns the vehicle, just as your landlord owns the apartment. The fact that the lease contract requires you to insure the vehicle does not change ownership.

[TJones]

This is incorrect. The leasing company owns the vehicle, just as your landlord owns the apartment. The fact that the lease contract requires you to insure the vehicle does not change ownership.

There is a LEINHOLDER, just like you have a LEINHOLDER on a conventional purchase, until you pay off that loan, you don't actually own squat. All registration and title work to the state is in your name though Red. If you got pulled over in your lease car, the nice officer isn't gonna ask you if you are Mr. Prolease.

Edit: Your name along with the Leasing Co. or Bank's name also.

Edited August 1, 2007 by TJones

[RedScare]

Wrong.

When you purchase a car, title transfers to the buyer. The bank places a lien on the car, but ownership (subject to the lien) is vested in the buyer.

In a lease, ownership never transfers to the buyer. The only difference legally from a rental car is the length of the lease.

EDIT: And, just an FYI. I routinely run license plates on www.publicdata.com. The listed owner commonly shows a lease company. If the lease company borrowed money to buy the car, and the bank demanded to secure the loan, the bank could also be listed as a lienholder.

Edited August 1, 2007 by RedScare

[TJones]

Wrong.

When you purchase a car, title transfers to the buyer. The bank places a lien on the car, but ownership (subject to the lien) is vested in the buyer.

In a lease, ownership never transfers to the buyer. The only difference legally from a rental car is the length of the lease.

Have you read ANY of this stuff, only if the the buyer decides to walk away after the term of the lease, will the title not change hands. If he finishes purchasing the vehicle, be it through stokin' a check or refinancing to pay it off, the title will change hands, just like a conventional loan, you don't get the title until you have paid it off.

Edited August 1, 2007 by TJones

[RedScare]

Buying the car at the end of the lease is a separate transaction. DURING the lease, ownership remains with the leasing company. That is the entire point of a lease. I do not need to read the thread to know that your post is wrong.

Sounds to me like you are confusing "smart loans", where there is a balloon payment at the end of the loan, with a lease. Legally, they are entirely different, even if the monthly payment is similar.

[TJones]

The same holds true in a lease, as soon as you payoff the car, it is yours, that is one option you have that is subject to the lien. When your lease is up, the lease company, can't say, "NO, we want the car back, and you can't pay it off." That is subject to the lien/lease agreement, that is NOT allowed. Title doesn't transfer ownership on a conventional loan, until you make the last payment, which is "subject to the lien."

When you made payments on your car Red, was the title in your hand, or in the bank's vault ?

EDIT: No, I am not confusing anything, you have the option of refinancing the remaining balance as well on our lease. It is not any kind of gimmicky crap.

Edited August 1, 2007 by TJones

[RedScare]

You are confusing title with ownership. When you purchase a car with a loan, OWNERSHIP and TITLE transfer to the purchaser. The fact that the bank holds the title as security for the loan does not change the fact that ownership transferred to the buyer, as did the title.

Lease contracts routinely contain an option to purchase the car at the end of the lease. That has no effect on the ownership of the vehicle during the lease. Ownership remains with the lease company.

Ask your finance guy who owns the car during a lease. Try not to look embarrassed when he gives you the answer.

As for this thread, I am done.

NOTE TO READERS: The lawyer says a lease does not give ownership to the lessee. The car guy says it does. YOU decide who to believe.

[102IAHexpress]

So when I lease a vehicle is it registered in my name or the name of the lessor?

[RedScare]

So when I lease a vehicle is it registered in my name or the name of the lessor?

The lessor.

[jm1fd]

Buying the car at the end of the lease is a separate transaction. DURING the lease, ownership remains with the leasing company. That is the entire point of a lease. I do not need to read the thread to know that your post is wrong.

Sounds to me like you are confusing "smart loans", where there is a balloon payment at the end of the loan, with a lease. Legally, they are entirely different, even if the monthly payment is similar.

OMFG. THANK YOU! That's what I was saying earlier.

[102IAHexpress]

The lessor.

So from what I understand in Texas the lessor is required to pay the sales tax? But because the leasee does not know any better he/she agrees to pay the sales tax, by virtue of the sales tax being

[LarryDallas]

It depends mainly on what others have said but another factor to consider is what kind of car you will get. If it is an expensive car then leasing is the best thing to do so you don't get hit hard with depreciation and never have to worry about paying for repairs on fancy systems like laser guided crusie control or an air conditiong system with 4 sensors in the car to monitor temp. and circulate air to where it is more warm; stuff like that.

If you plan on getting a cheap car then buy it outright.

[RedScare]

So from what I understand in Texas the lessor is required to pay the sales tax? But because the leasee does not know any better he/she agrees to pay the sales tax, by virtue of the sales tax being

[102IAHexpress]

No, it is really because if the lessor ate the cost, he would lose money. All taxes and other costs are passed through to the consumer, whether the consumer knows it or not. Since every profitable leasing company passes the sales tax through, you are unlikely to get a lease if you refuse to pay the tax.

But isn

[Watchful]

For too many people, leasing is basically a way to get yourself into a car you couldn't otherwise afford.

There is almost always a cost. Ask yourself why dealers enjoy setting up a lease.

Dave Ramsey (.org) calls is a "fleece" instead of a lease.