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Lease Buyout in Non-Lease Friendly State

Discussion in 'How to Buy a Kia Stinger' started by Kyle, Dec 6, 2018.

  1. Kyle

    Kyle United States Newish Member

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    Hey everyone, I’m looking at a RWD MY18 bass GT and wanted to get a feeling for doing the lease buyout option in a state (Ohio) with bad lease tax laws. Basically in Ohio you get taxed up front on the sum of the lease payments. Then you get taxed again on the buyout amount. Has anyone gone the lease buyout route in a state like this? Unfortunately I do not qualify for the loyalty or the conquest rebates so the lease cash looked like the better deal before I learned more about my tax laws.

    If I understand it correctly, on a typical lease I’d be looking at paying my 7% state sales tax on ~50% the sale price of the car (to cover the tax on the lease payments) and then a 7% tax on the buyout amount (so close to 100% the sale price of the car. Does this sound right? Is there anything I can do to limit the amount I’ll have to pay in tax up front? I’m thinking my best option would be to get the shortest lease possible at the lowest possible monthly payment. Thoughts? If anyone would be up for running rough numbers, the asking price is currently $35,000 and the lease cash for the MY18 GT is $5,600.
     
  2. Ruturaj

    Ruturaj United States Active Member

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    Lease cash is different for shorter lease, check that out first. I would say pay all depreciation (original cost - lease end remainder value) then pay off car at end. Percentage wise that makes sense in your case.
     
  3. Kyle

    Kyle United States Newish Member

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    I just looked again on the Kia website and tried changing the lease term from 36 to 24 months and it took the lease cash out so it does look like that’s a no go.

    So you’d recommend carrying the lease the full term to pay the least amount of tax at purchase? I’d think that the rent charges would end up costing more than the extra tax would, but I don’t have any numbers to back that up unfortunately
     
  4. MerlintheMad

    MerlintheMad United States 2500 Posts Club!

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    I think so too. 7% on $37K is $2,590. That's pretty close to the sale price of my car on the title. And 36 months of lease "rent" (heh, what a euphemism!) was well in excess of $4K. So even in double tax to the max Ohio, it looks like you save at least $2K by leasing and then buying out, using my lease as an example (if it had been the same values in Ohio).
     
  5. Kyle

    Kyle United States Newish Member

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    If I don’t do the lease I’d probably take the $2500 KMF rebate, so it sounds like it’d be close to a wash when it’s all said and done.
     
  6. MerlintheMad

    MerlintheMad United States 2500 Posts Club!

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    You get a $2.5K finance rebate? Heh, our offer for buying was only $950.
     
  7. Kyle

    Kyle United States Newish Member

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    Ouch, KIAs still got the $2500 rebate listed so I’m hoping I’ll get it. Haven’t talked to the dealership yet, trying to get my ducks in a row first!
     
    • Like Like x 1
  8. Ucinn

    Ucinn United States Stinger Enthusiast Sustaining Member

    The finance rebate is for 2.9% at up to 66 months, better off going 0% for 66 and giving up that 2500
     
  9. Kyle

    Kyle United States Newish Member

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    Was planning on putting enough down to make the finance rebate make sense over the life of the loan. Also planning to pay off fairly aggressively since Kia doesn’t penalize for over paying (from what I’ve been told at least)
     
    • Like Like x 1
  10. Ucinn

    Ucinn United States Stinger Enthusiast Sustaining Member

    What dealer are you talking to? I dealt with most of them here in the Cincy area.
     
  11. Kyle

    Kyle United States Newish Member

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    So far I’ve talked with Superior, kings, Jeff Wyler, Cronin out in Harrison, and today talked to napleton Kia out in Indy. I’ve been jumping on the MY18 GTs and GT1s as soon as I see them but they are starting to get few and far between
     
  12. Ruturaj

    Ruturaj United States Active Member

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    What I meant was, for 50k car the residual is 25k, pay 25k upfront on lease and you pay tax on 50k. Then do immediate buy out, you pay taxes on 25k now. That's the only way to save tax money.
     
    • Like Like x 1
  13. oddball

    oddball United States Member

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    Texas is one of those unfriendly states. We do balloon loans instead. The lease incentives are applied to balloons, and the general structure is similar to a lease, but it's a traditional loan so you're only taxed once. The loans still run through KMF.
    Balloons were can be predatory, so some dealers avoid them. You have to shop around to find someone that will work with you.
     
  14. Ucinn

    Ucinn United States Stinger Enthusiast Sustaining Member

    Pretty much all I dealt with too except for Kia Florence, it ended up between Florence and Fairfield and Fairfield ended up winning. Gave me the best deal and had the color combo I wanted too. Superior wa a joke and is a bait and switch dealer. even left a review on their FB page explaining it. I will never deal with them again.
     
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