Hello. I have 2 more months on my lease and it seems I have positive equity at this time. My pay-off amount is less than kbb's trade-in value in good contition. I'm from IL and want to trade my leased vehicle at a dealership for a purchase of a new car. I hear I can save in some sort of tax credit if I buy a new car with a trade in... Is my best option to trade-in the lease and save on some tax credit, or do I need to buy the car myself and then trade it in? Thanks for your help. My lease is through Toyota.

not 100% sure what you mean.

I know you dont pay sales tax on the value of the car you're trading...not sure how that works though since you dont actually own it and are just leasing it. You might have to buy the car at the end of the lease and then trade it - ask the dealership they should know.

Some states charge sales tax on the amount of the sale before the trade-in is applied, and some states charge sales tax on the amount of the sale after the trade-in is applied. I'm guessing that's what the OP is getting at.

In the unlikely event that he really does have "positive equity" (as opposed to the other kind of equity? ), he would have to buy the leased vehicle, pay the sales tax on it, and then trade it in. It ain't gonna work.

since you're ona lease... the car isn't yours. If you want to, the dealer will make it all work out. How can you trade in something you're "renting" for something you want to buy?

If you are trading it in to the dealership you originally leased from they would LOVE to take your "trade in". Expect them to include the two lease payments and other fees in the purchase price of the new vehicle. They'll dress it up like they are making the last two payments for you, but don't be fooled. The payments are yours and they'll stay that way.

It may be too late to add my comments, but our experience was the lease company allowed us to negotiate a sale of the leased vehicle [actually back to the original dealer] without us ever having to purchase the car so no titling fees or tax. The lease company then cut us a check for the difference. Good deal for us because we could take the cash and negotiate for a different car and a good deal for our lease company since they were not stuck with a car to sell. Your lease company may allow you to do a similar deal if that would help you with the state tax .

BTW- if you buy the car from Toyota-you most likely will have to pay sales tax on the residual value if you are buying the car yourself.. You need to call and ask Toyota. We ended up selling our leased car to car max. We didnt buy a car from Car Max, but they said they would give the "tax break" with lease trade in cars.

woowoo2 said:soonerfanjames said: If you trade in a 15k car and buy a car @ 20k- you only owe sales tax on the price difference (10K).

Yep, Fuzzy math....

actually I wouldn't put it past a dealer to do fuzzy math like that to pocket the 'tax' on the extra 5k.