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Do you have to pay sales tax when you lease a buyout? Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our goal is to help you make better financial choices by providing you with financial calculators and interactive tools as well as publishing impartial and original content. This allows users to conduct studies and compare data for free to help you make informed financial decisions. Bankrate has agreements with issuers including, but not limited to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Make Money The offers that appear on this website are provided by companies that pay us. This compensation may impact how and when products are featured on this site, including for instance, the sequence in which they appear within the listing categories and other categories, unless prohibited by law for our mortgage or home equity, and also other products for home loans. However, this compensation will not influence the information we provide, or the reviews you read on this site. We do not include the universe of companies or financial offers that may be available to you.



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4 minutes read. Published 24 January 2023
Written by Dan Miller Written by Points and Miles Expert Contributor

Dan Miller is a former contributor to Bankrate. Dan wrote about loans, home equity and debt management in his work.







Editor: Rhys Subitch Edited by Auto loans editor

Rhys has been editing and writing for Bankrate since late 2021. They are passionate about helping readers to control their finances with clear, well-researched information that break down complicated topics into bite-sized pieces.









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Sales tax is an element of purchasing and leasing vehicles in states that impose it. Like with any purchase there are rules regarding the amount and time you'll pay when you lease the car differ by state. If you decide to purchase the lease car at the conclusion of the lease, you could also have for sales tax to be paid as part of the purchase. Do you have to pay sales tax when you lease a buyout?
The possibility of paying sales tax for a lease purchase is contingent on the state in which you purchase and the lease's conditions. It's likely that the state you live in rolled the tax into your .


A lease buyout is what it sounds like? It usually happens at the end of your lease period is when you choose to keep your leased car rather than return it to the dealer. When you buy out the lease, you'll have to pay the residual value of your car , which is the remaining value at the lease's conclusion -- and any applicable taxes and fees. Not all leases allow for the purchase of a lease, which is why you have to buy out of your lease. What is the sales tax applicable to my lease buyout? Depending on your state and lease terms the lease may already have paid all the required sales tax. At the very least it is likely that you've already paid a portion of the sales tax for the vehicle, which makes it highly unlikely you must pay taxes on the entire cost of the car you leased. A majority of states include the tax on sales into the monthly installment of the car lease, however, a few states insist that the entire sales tax for all your to be paid upfront. In some states, such as Texas where the leasees have to contribute sales tax on total value of the leased car instead of just the tax that is imposed on the payments made during the lease. How do I calculate the sales tax for my lease buyout? Before you calculate the sales tax on the lease purchase you'll need to know the car's residual value. The lease payment is determined by the difference between the car's original value and its residual. The best method of calculating the sales tax you pay on the lease purchase is to look at the original lease documents which will contain an explanation of the tax rates. Contact your state's Department of Motor Vehicles or visit its website to learn the method of calculating sales tax for leased vehicles in the state you reside in. You'll know what to expect for taxes when you purchase the lease. If you'd prefer an exact picture of how much you'll be paying, you may want to speak with a tax expert. Should I think about leasing a buyout? There are a couple of factors to consider when determining whether it's a good idea to consider a lease buyout. Check first if the car has value at or near as much than the amount you're paying for. If it's not, it's probably a good sign that the lease buyout isn't a great option. Another factor to consider is what happens at the end of the lease. If you exceed the mileage limit or your vehicle is showing excessive wear and tear, you could be charged additional charges when you trade your vehicle into. Depending on the amount the charges will be, it could be beneficial to perform the lease buyout. The final decision of whether to buy your lease car is based on a variety of factors. Being aware of whether you need to pay sales tax -- and how much to pay when you purchase your car leased can help you decide whether it is a good idea for you. The laws vary from state to state and so make sure to make sure to check the lease documents and the state's Department of Motor Vehicles for the rules on sales tax in the area you reside. Be aware that you have the option of reselling the car you leased or make an option to buy out the vehicle you lease at any franchised dealer who carries your brand. If you're not happy working with the dealership who you initially leased the vehicle through, you can simply transfer your business to another dealership. Frequently asked questions Can you finance a lease buyout? Yes. If you're thinking of buying out your lease however you require a loan to fund it, you can apply for a lease purchase loan which is provided by a variety of lenders.

Do you have to pay an initial down payment to buy or selling your lease? While making a down payment for the purchase of your lease isn't required however it can reduce the amount of your monthly payments and help you save cash in the long run.

What are the rates for lease buyouts? Like auto loan rates rate, lease buyout rates differ depending on the lender and are based on several aspects. Check out current interest rates to determine the APR you can expect.




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Authored by Points and miles Expert Contributor

Dan Miller is a former contributing writer for Bankrate. Dan wrote about loans as well as home equity and debt management in his work.



Editor: Rhys Subitch Edited by Auto loans editor

Rhys has been writing and editing for Bankrate from late 2021. They are passionate about helping readers gain confidence to manage their finances with precise, well-researched and reliable information that breaks down complicated topics into bite-sized pieces.






Auto loans editor




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