Avoid Luxury Tax by Leasing

[bomberR17]

I stumbled upon something while shopping for a car. When leasing a car, the government only treats your lease payments as your "purchase price" and that's what you pay PST for. So if you lease a $60k car with buyout of $30k, you only pay 7% PST in your payments, and 7% on the buyout if you choose to buy out the car. If you were to pay the full $60k, you get charged 10% PST. On a $60k car, that 3% is an extra $1800. Depending on the interest rates, even if you were looking to fully buy a car, leasing might be a good option, especially if leasing is a low rate like 0.9%.

This will probably be more prominent when the government be increasing the luxury tax in April. Lease a $150k car with a buyout of $75k, instead of 25% tax, you now pay 10%.

I'm so surprised no one has mentioned this, I searched and only found one article from Kelowna.

https://www.kelownanow.com/news/news...se_or_finance/

Finally, when leasing in BC you save the luxury tax at the end of the term, should you choose to buy.

https://www2.gov.bc.ca/assets/gov/ta...-companies.pdf

You calculate the PST payable on down payments, lease payments and other charges (i.e. the
lease price) that your customer pays to use the vehicle based on the following formula:
PST payable = Applicable PST Rate x Lease Price

The lease price does not include:
 The GST
 An option-to-purchase (lease buyout) as described in Option-to-Purchase (Lease Buyout)

EDIT: Actually I think the Kelowna article might be wrong cause it says

The applicable PST rate for passenger vehicles leased in BC depends on the vehicle’s tax
rate value. Generally, the tax rate value for a passenger vehicle is the fair market value of the
passenger vehicle on the first date you (the lessor) lease the passenger vehicle under an
agreement. To determine the rate, see PST Rates above.

Oh wells, got excited for a while.

[twitchyzero]

well i hope they close this loophole and pass the savings onto the poor (you know, buying used) and charge them one tax instead of the 12%

[noclue]

They calculate the luxury tax based on the purchase price no matter if you buy or lease. I heard there was a way that if you have a good relationship with the dealer they can inflate your trade in value to bring down the value of the car below the threshold.

That said, this is an awful tax policy to punish success. Even a toyota 4runner can get hit with the luxury tax. Bring back HST!

[Teriyaki]

Luxury tax is one thing, what pisses me off the most is charging tax on the sale of the USED car even privately. A used car gets sold 10x times to different owners, thats 10x the tax revenue for the government. What in the world

[Funnel]

You would still need to pay luxury tax on the difference regardless the trade in value.

example 100k car with 20k trade in, 15% on 80k
100k with 50k trade in, you still pay 15% on the 50k, not 12%

Originally Posted by noclue

They calculate the luxury tax based on the purchase price no matter if you buy or lease. I heard there was a way that if you have a good relationship with the dealer they can inflate your trade in value to bring down the value of the car below the threshold.

That said, this is an awful tax policy to punish success. Even a toyota 4runner can get hit with the luxury tax. Bring back HST!

[NKC ONE]

While we're on the topic of taxes, what's the deal with the Canadian border charging taxes on taxes that were paid in WA?

I buy something that's shipped to or purchased from WA and we get taxed 6.5%, then when we cross the border, we get taxed on the goods and the tax that was slapped on in WA. Can someone explain this to me?

[underscore]

Originally Posted by Teriyaki

Luxury tax is one thing, what pisses me off the most is charging tax on the sale of the USED car even privately. A used car gets sold 10x times to different owners, thats 10x the tax revenue for the government. What in the world

The stupid thing is you only pay tax on the difference if you trade the vehicles directly. But if I sell my car, and then go buy a different car, that's really no different than a trade but we both pay full tax. I can only assume someone who owns a bunch of dealerships pushed hard for that nonsense to make going to a dealership more appealing.

[J____]

Originally Posted by NKC ONE

While we're on the topic of taxes, what's the deal with the Canadian border charging taxes on taxes that were paid in WA?

I buy something that's shipped to or purchased from WA and we get taxed 6.5%, then when we cross the border, we get taxed on the goods and the tax that was slapped on in WA. Can someone explain this to me?

because Canada

[68style]

Originally Posted by NKC ONE

While we're on the topic of taxes, what's the deal with the Canadian border charging taxes on taxes that were paid in WA?

I buy something that's shipped to or purchased from WA and we get taxed 6.5%, then when we cross the border, we get taxed on the goods and the tax that was slapped on in WA. Can someone explain this to me?

If you've ever imported a car, when you pay the air conditioning excise tax of $100 or whatever it is, they charge you tax on that tax

[twitchyzero]

never understood why anything intangible like services isn't only charged the 5% GST (i'm looking at things like freight/PDI)

at work we don't bill clients with tax on the time for service, so why is there tax when i bring my car to the shop for labour costs?