Question regarding lease end purchase in Texas.

[ucbsupafly]

Hello,

I have a question regarding lease end purchase in Texas. My family's X5 3.0 lease is scheduled to expire at the end of the year. Now since in Texas, tax is paid up front on the total price of the vehicle regardless of lease or finance, if we decide to puchase the car in December, do we have to pay tax again or just the residual itself? Anyone with info is welcome to comment.

Regards,

Frank

[JonInSanDiego]

Just the residual. You already have title to the car so it won't transfer ownership.

[Tex]

... lease end purchase in Texas....since in Texas, tax is paid up front on the total price of the vehicle regardless of lease or finance, if we decide to puchase the car in December, do we have to pay tax again or just the residual itself?Frank

Hi Frank,

Unfortunately, the state of Texas does not recognize "leasing" as such (in the sense of a long term rental), but only as a form of financing. So when you lease, the lessor pays the tax up front on total value, and the lessee has to pay for it. At the end, if you want to buy the vehicle, you have to pay for the tax on the residual as this is considered a transfer of property.
There is however one loophole around it, depending on how well you know your dealership, what is the actual value of your car and to which extent you are willing to go. You can sell the car to the dealership or to a car place and get sales tax credit for it, pay the residual to BMWFS and buy this car or another one and pay sales tax. In the end, sales tax credit + sales tax = about $0.

Of course, no dealership in Texas ever tells you these things when you sign up for a lease...lovely

[ucbsupafly]

Hi Frank,
There is however one loophole around it, depending on how well you know your dealership, what is the actual value of your car and to which extent you are willing to go. You can sell the car to the dealership or to a car place and get sales tax credit for it, pay the residual to BMWFS and buy this car or another one and pay sales tax. In the end, sales tax credit + sales tax = about $0.

Of course, no dealership in Texas ever tells you these things when you sign up for a lease...lovely

Wow, that is something good to know. How willing will the dealership be in assisting with such "loop hole" transaction?

I've also been billed a "property tax" from BMWFS this month (5 month before the end of lease) and they couldn't provide me with any tax document indicating the charge. And why would they all of the sudden bill me now after two and half years of ownership? I understand the property tax law on vehicle lease was changed in '02 and there's a exempt form. But getting billed by BMWFS w/o proper evidence is kind of ridiculous. Lease is a major PIA in Texas. Any thoughts on this? Thanks in advance.

[Tex]

Wow, that is something good to know. How willing will the dealership be in assisting with such "loop hole" transaction?

Like anything "dealership dependent", there is no good general answer to that one. What I would do is the following:
- find out what the payoff from BMWFS is, and if they are willing to negociate something. Sometime, they will be willing to knock some $ of the payoff, and that may make for a very good purchase despite the sales tax
- Once you know that, visit your dealership and find out how much they would be willing to buy it for. You can tell them it is a leased car and that you may or may not be willing to buy it afterwards, but that you are considering the question and crunching numbers
- Ask them if they would be willing to buy it, CPO it and sell it back to you, in which case, you need to factor in that the CPO process is supposed to cost between $1000 and $1500 (from what I read on other boards) + whatever would need to be fixed to pass CPO, plus generally about >$1000 profit for the dealer. This is a good alternative because you can get the warranty, save on sales tax and keep your car.

[Dave 330i]

Hello,

I have a question regarding lease end purchase in Texas. My family's X5 3.0 lease is scheduled to expire at the end of the year. Now since in Texas, tax is paid up front on the total price of the vehicle regardless of lease or finance, if we decide to puchase the car in December, do we have to pay tax again or just the residual itself? Anyone with info is welcome to comment.

Regards,

Frank
since you fully paid the tax at purchase, you shoul not have to pay tax on the residual. I moved from CA to TX, but I paid tax on the residual, because I paid tax on the payment each month.