[dan914]

This is my first time leasing a car and I have a question about how sales tax is calculated. I live in New York and here we are not taxed on the full purchase price of the car.

My question is: Will I pay tax on just the principle part of the lease (i.e. Sale Price - Residual)? Or, do you also pay tax on the interest and/or fees?

From the quote they gave me, it seems like they are calculating tax on the interest and fees. I just want to make sure that this is how it is supposed to work.

Thanks.

[Coreyn]

You pay sales tax on the lease payment, very simple.

[Leighton]

I am a New York resident who has leased many cars from BMWFS. I have my own Excel spreadsheet to calculate leases. The NY sales tax is based on the total of all payments the lessee will make over the life of the lease, including all money paid at drive-off and must be fully prepaid, not paid in monthly installments. All money paid at the end of the lease for wear and tear, extra miles, disposition fee, and vehicle purchase is also taxable and BMWFS will add and collect it. Adding the lease tax into the lease total increases the total capital cost subject to financing fee (money factor). That increases the total lease cost which further increases the tax and the financing fee. The lease formula has all of this built in. If you prepay the tax, BMWFS treats it as a general capital cost reduction subject to tax up front. BMWNA and BMWFS policy is to insist that the dealer register the car in order to perfect the title and ensure registration only to the lessee. Because of the amounts of tax involved, New York supervises car dealer tax reporting and paying very intensely. I doubt that there is a way to avoid the tax and finance fee on the tax payment.