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Old 08-29-2015, 05:41 PM
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Turning in a lease early question

Hey guys got a question for those of you more familiar with leases. My gf is looking to trade in her Camry for a jk soon. Her Camry is a lease and I was wondering if she does a trade in to a dealer instead of just turning it in is their tax benefits like on an owner car as in she doesn't have to pay tax on the trade value of the car? Big consideration factor as sales tax here is 8.625 percent


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Old 08-31-2015, 11:12 AM
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Re: Turning in a lease early question

Here you'll have to pay off the terms of the lease and cover the residual value if you trade it a non lease dealer. Since she doesn't own the car there may be more involved in your state. I don't know about NY but you should ask your leasing company as it may be a third party lease which could allow for more options.
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Old 09-01-2015, 10:14 PM
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Re: Turning in a lease early question

She might have to pay tax to get the diff between residual value and buyout price to use it toward the new car.
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Old 09-08-2015, 04:43 PM
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Re: Turning in a lease early question

In NY, you will only pay sales tax on the difference between trade and sale price of the new vehicle, even if you have negative equity on your trade.


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Old 09-18-2015, 09:19 PM
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Re: Turning in a lease early question

She will owe the remaining payments on the lease plus the lease termination fee plus any charges for mileage or excess wear and tear. She gets no credit for sales tax as a lease is a rental not an ownership. If she buys the car for the residual and then trades it against the JK she will only pay sales tax on the difference between the trade and the JK TO THE DEALER but she will also pay sales tax on the residual purchase price of the leased car as she has purchased it. If it is simply an early turn-in she will pay sales tax on the entire amount of the new car.
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Old 09-19-2015, 10:22 PM
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Re: Turning in a lease early question

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Originally Posted by Pcardad View Post
She will owe the remaining payments on the lease plus the lease termination fee plus any charges for mileage or excess wear and tear. She gets no credit for sales tax as a lease is a rental not an ownership. If she buys the car for the residual and then trades it against the JK she will only pay sales tax on the difference between the trade and the JK TO THE DEALER but she will also pay sales tax on the residual purchase price of the leased car as she has purchased it. If it is simply an early turn-in she will pay sales tax on the entire amount of the new car.

Not entirely true; in NY if the dealership you trade to buys out the lease and retains the car to sell on their lot or sell off to wholesale, you only pay sales tax on the difference between purchase price of the new vehicle and trade in of the old. For example, in January I traded our 2012 Grand Cherokee Limited in for a 2015 Toyota Sienna. We had a 39 month lease, which had 8 remaining payments. The dealership took it on trade for 24,500; my 8 remaining payments and the residual value totaled approximately $22,750. We purchased the Sienna for a negotiated sale price of $39,300; I walked away with $1,750 in equity towards the Sienna and only paid sales tax on $14,800.


Although it is possible to get out of a lease the way I did (and have done two other times in the last), in MOST cases the dealership would rather you pay the remaining lease balance, plus any applicable fees and then they hand the car over to the leasing company as a lease return.



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Old 10-06-2015, 09:31 AM
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Re: Turning in a lease early question

Yeah here it's the same way... trading in a lease is just like trading in a buy. I drove my '11 JK for a year or so and put 13,000 miles on it. It was a 3 year lease. After that first year I traded it for a '12 JK and paid zero penalties, etc. I got basically an even trade because of how well JKs hold value. My payment went up $30 a month simply because the new one had more options.
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Old 10-06-2015, 10:22 AM
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Re: Turning in a lease early question

In every state I have worked in you do not get credit for "trading in" a leased (rented) car as you do not own it. Here is some verbiage that explains it.

Lease "Trade-In"
A lessee of a motor vehicle may replace his or her motor vehicle by purchasing or leasing another motor vehicle and "trading in" his or her leased vehicle. If the new dealer/lessor chooses to purchase that motor vehicle, the new dealer/lessor may purchase the motor vehicle that its customer "trades in" from the lessor of the "traded in" vehicle using its customer's option to purchase.
When a lessee "trades-in" a leased motor vehicle on the purchase or lease of another motor vehicle, there are two transactions that occur. One is the sale of the leased motor vehicle (with permission of the lessee if the lessee has the option to purchase or at the discretion of the lessor if the lessee does not have the option to purchase) from the lessor to the dealer at the purchase option amount price (or the subsequently negotiated price). The other is the sale or lease of the replacement vehicle to the dealer's customer. Because there are two transactions, the seller or lessor of the replacement vehicle may not reduce its taxable sales price by the amount allowed for a "trade-in."

If your tax code allows for a reduced tax liability for turning in a rental (leased) car I would like to see a link.
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