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      02-14-2012, 03:04 PM   #1
MattTheCarNut
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Calculating tax on lease in TEXAS

The 328i will be my first lease in texas. As I understand, Texans get to pay tax on the full amount of the vehicle. Please help me confirm my calculations.

MSRP Invoice
2012 BMW 328i $34,900.00 $32,110.00
Imperial blue $550.00 $500.00
Anthracite wood trim
Saddle brown leather
Premium pkg ZPP $3,600.00 $3,275.00
Luxury line ZLL $2,100.00 $1,915.00
Technology pkg ZTP $2,550.00 $2,320.00
Xenon headlights 522 $900.00 $820.00
Heated front seats 494 $500.00 $455.00
Satelite radio $350.00 $320.00
Destination Del $895.00 $895.00
Training service TRA $0.00 $200.00

TOTAL: $46,345.00 $42,810.00


Negotiated Price (Inv. + $500.00): $43,310.00
Down Payment: $0.00
Cap Reduction Cost: $43,310.00
Residual (64%): $29,660.80
Lease Usage: $13,649.20
Lease Usage Per Month (36mo): $379.14
Int on Monthly Pmt (.00195 MF): $142.29
Monthly Pmt ex TTL: $521.44

So if I add tax to $43,310.00 with a 6.25% rate, the tax burden is $2,706.88.

This is where I'm not sure of myself. If I roll that into my lease at a monthly rate, it comes to $79.19 of tax per month. This would make my lease payment with tax $596.63.

Bear in mind, I've left off missing fees (acquisition, dealer fees, etc), but if the above stays the same, did I calculate the tax correctly?

If so, this makes a strong case to trade in instead of private sale of current car!

*And, no I haven't received the Invoice + $500 deal yet. I just want to have all my numbers correct before the dealerships try to brainwash me with dealerspeak.*
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      02-14-2012, 04:46 PM   #2
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In Texas, if you trade in a car, it reduces by the amount of the trade-in value the taxable amount on the car. It is to your benefit to trade in the car unless you can sell your old one for more than 6.25% above what the dealer offers.
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      02-15-2012, 12:31 AM   #3
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plugged your numbers in my calculator. (ignore cell C7, i didn't update the text)
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      02-15-2012, 08:04 AM   #4
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Quote:
Originally Posted by matt_335Ci View Post
plugged your numbers in my calculator. (ignore cell C7, i didn't update the text)
matt_335Ci
That is not valid in Texas. You don't pay tax on the payments, instead you pay tax on the selling price of the car. You can either pay that up front, or roll it into the lease (add to selling price).

OP,
If you trade, it's like a cap cost reduction. Your selling price is reduced by the trade amount, which reduces your taxes. So, you save 6.25% of your trade-in value. Plus, the trade lowers your cap cost and frther reduces your payments.
However, many folks argue not to put any cap cost reduction on a lease because you could lose some or all of the cap cost money you put in if there is a total loss on the car (wreck). If you are a repeat leaser, it's not a big deal, but when you are leasing for the first time and have a trade, you have to decide what to do.
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      02-15-2012, 08:17 AM   #5
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^

Thank you, sir! So do you concur my calculation for Texas is correct?

Also, I have another question.

My GTI trade in would be $19,000; the payoff is $11,000. Can I trade in the GTI and have the dealer cut me a check for the $8,000 in equity, thus NOT putting that money towards the lease? With this way, would it still lower my tax burden (but not lower the cap cost of the transaction)?
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      02-15-2012, 08:44 AM   #6
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Not sure how much your trade is worth, but assuming it's $7K or more, a better use for the money would be:
  • Apply MSDs (Multiple Security Deposits). You get 0.00007 MF reduction with each SD, up to 7x = 0.00049. Net MF becomes: 0.00146
  • Note: cost of each SD is your lease payment rounded up to nearest $50 after applying MF reduction
  • Pay the sales tax up front with some of the trade money instead of rolling into the lease. You will save ~$150-$200 of interest on the sales tax.

With the above:
  • I get a net savings of ~$1500 over the original scenario of rolling taxes into cap cost.
  • Putting $7K into cap cost reduction wil lower taxes, but still rolling the remaining taxes in yields ~$1000 net savings (Lease cost + $7K trade).
  • The extra $500 savings of the MSD route comes from savings on the interest rate.

BTW, I am in Texas and looking at going from purchase to lease with an F30 as well (I have an '02 330i) and the 7xMSD is what I am going to do. Also, I doubt you will get any dealer in Houston to take the $500 over invoice deal on any car, much less beand new F30 - dealers in Dallas are the same. But, let me know if you do.
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      02-15-2012, 08:47 AM   #7
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Quote:
Originally Posted by MattTheCarNut View Post
^

Thank you, sir! So do you concur my calculation for Texas is correct?

Also, I have another question.

My GTI trade in would be $19,000; the payoff is $11,000. Can I trade in the GTI and have the dealer cut me a check for the $8,000 in equity, thus NOT putting that money towards the lease? With this way, would it still lower my tax burden (but not lower the cap cost of the transaction)?
Yes, your numbers look correct.

Look at my followup post, looks like you have ~$8K equity in your trade, so the MSDs would work - ~$3K for taxes and ~$3.5K for MSDs.

I am not sure if the dealer will do a cash deal for your car, you would have to ask. May have to do a private sale or sell to CarMax or something like that to get cash.

Last edited by pcbrew; 02-15-2012 at 08:10 PM.. Reason: correct typos
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      02-15-2012, 04:02 PM   #8
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^ Thanks for the advice, pcbrew. Definitely have many options available to me! Better than no options at all, I'd say.
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      07-07-2014, 02:50 PM   #9
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Has anyone turned in a lease and then leased another BMW in Texas? Do you have to pay the 6.25% tax on the entire cost of the new leased car or did you credit for the returning car residual and only have to pay the differences?

For example:
The residual on my current lease is about 36k, the 228 i'm looking at is about 43k. Do I pay 6.25% of the 43k or do I pay 6.25% of the difference (43-36)=7k
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      07-07-2014, 03:50 PM   #10
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Did the MFs skyrocket lately? That seems high.
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      07-07-2014, 07:50 PM   #11
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Texas Lease

Quote:
Originally Posted by cavm335i
Has anyone turned in a lease and then leased another BMW in Texas? Do you have to pay the 6.25% tax on the entire cost of the new leased car or did you credit for the returning car residual and only have to pay the differences?

For example:
The residual on my current lease is about 36k, the 228 i'm looking at is about 43k. Do I pay 6.25% of the 43k or do I pay 6.25% of the difference (43-36)=7k
To my understanding, yes, if your lease is up and you lease a new vehicle you would have to pay the tax on the whole quantity of the new vehicle. This is the reason why leasing in Texas in not convenient and this is also why we have the owners choice program. It is basically a lease but your name is on the vehicle's tittle, so technically you would be paying the vehicles's tax not BMW, so when your lease is up, if you want to purchase the vehicle at the end, you don't have to pay taxes again on the residual amount. On the lease, you are stated as a co-owner, where bmw is the principal owner, when you pay the taxes on the vehicle, since bmw is the primary owner, they are the ones who get the credit. Thats why when you purchase the vehicle at the end of the lease, since bmw is completely transferring the ownership of the vehicle to you, it is considered a new transaction, and you have to pay taxes over the residual or the agreed amount between you and bmw. This applies to Texas and a couple of other states, thats why leasing is not that good in Tx. Hope this helps!
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      12-06-2016, 01:44 PM   #12
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Two words: tax credits
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