Question on a lease takeover

[snowfarmer]

OK this might be a dumb question so feel free to flame the crap out of me for asking it...but please answer the question first...then roast me.

If I assume someone’s lease on their car, how does ICBC calculate the tax payable? Do they add up the remaining payments due + buyout to determine the tax payable?

[vash13]

You pay tax on the monthly lease amount. There is tax on the buyout amount at the end of your lease. Hopefully that makes sense.

[Badhobz]

There is no tax payable. When somebody takes over the lease they assume the lease price which includes GST and PST. There's only a transfer fee (usually 300-500) and then the new leasee is on the hook for the remainder of the contract and existing damages.

The old leasee just cancels their insurance and the new leasee gets new insurance for that car at the dealership. All transactions are done through the dealership.

[snowfarmer]

Thanks for the quick replies, looks like a car I’m looking at just became a little better deal if the taxes are already paid on it.

[inv4zn]

Originally Posted by snowfarmer

Thanks for the quick replies, looks like a car I’m looking at just became a little better deal if the taxes are already paid on it.

It's not "already paid on it", the original leaser paid taxes on whatever portion he leased (and paid for).

You will pay taxes on whatever portion you lease, it's just already included in whatever monthly/bi-weekly payment you will be making.

And as mentioned, there will be tax on the buy-out amount in the end as well.

I know it's nit-picking but you need to have it straight before you go in lol

[snowfarmer]

Yep, understood it's already worked into the lease payment, essentially I'm paying the taxes he owes on the original purchase. he's quoted the buyout price and \i have asked for a copy of the lease docs to determine if the price quoted is net of taxes.

Originally Posted by inv4zn

there will be tax on the buy-out amount in the end as well.

I know it's nit-picking but you need to have it straight before you go in lol

[inv4zn]

Originally Posted by snowfarmer

Yep, understood it's already worked into the lease payment, essentially I'm paying the taxes he owes on the original purchase. he's quoted the buyout price and \i have asked for a copy of the lease docs to determine if the price quoted is net of taxes.

No my friend, that's not what you're essentially doing lol.

We're all just trying to set you straight so you get your terminology correct and don't get hosed by some bs at the dealer.

Let's pretend interest rate is 0% just to make it easy.
Car is $50,000.
Original owner signed lease for 3 years, at $750 a month.
That $750 payment is made up of $660 car, $90 tax.
You take over the lease after 2 years, with same terms, so now you make the same $750 payment for a year.
When lease is up, the two of you have paid a combined $27,000 - of which $23,760 was for the car, and $3,240 was tax.
If you decide to buy out the car, you will pay tax on whatever you pay the dealer.

So again, you're just paying the tax on installments. The previous owner only paid the tax on the portion he leased. You will be responsible for the rest of the lease, as well as the buy-out if you choose to.

Again, I think you understand the concept - but if you show even the smallest amount of misunderstanding on how these work at the dealer, they will try to sneak shit past you just to earn a few hundred bucks.

You take over the lease after 2 years, with 1 year remaining.

[BrokenEuro]

Also to clarify for buyout: from my experience, buyout prices are quoted before sales tax.

[Badhobz]

i find that the most important part of assuming the lease is the condition of the car. The condition will dictate whether or not you'll end up having to pay a shitload of additional costs after the lease ends.

Tires will need to be at 50% or greater
Brakes will need to be at 50% or greater
Scratches/dents/dings have a certain size (usually the size and diameter of a small pool ball) anything larger than that will need to be repaired

Of course this is a factor if you decide to return the car, not so much if you were going to buy it out. The only way to get out of paying these fees is usually to work out a deal with the dealership and re-lease a new car from them. Then they'll waive most of those reconditioning costs.

[vash13]

On top of that! If you do decide to buy the car out at the end of the lease term, the dealer will charge something like 500 to inspect before selling it to you even though you were the one who has driven it all this time. Safety inspection on their side.

[snowfarmer]

the plan would be to buy it out, I've told the seller that I'd want to read the lease and confirm all lease end costs with the dealer.

thanks for the clear explanation inv4zn (and other posters), adding in taxes on top of the buyout quoted would render it less of a bargain and is probably a deal breaker.