Questions about Lifting/Moding and Leasing

[SnowTrail]

The taxes should still be in there if the dealer does the buyout.

Northern is referring to tax credit that some states give you eg, if you are trading a 10k car and buying a 20k car you are only taxed on 10k since you already paid taxes on the first car. if you are trading a lease you do not get tax credit. unless you buy it out first. So you can buy it out then trade it to get tax credit on the trade but it wouldn't make sense because when you buy it out you will still have to pay taxes on the residual...

 

[bofa]

The taxes should still be in there if the dealer does the buyout. The leased vehicle isn't owned by the lease holder so to get credit for it as a trade it would have to go into your name (pay tax) and then apply that towards the trade. The dealer of course does all the paperwork and you just sign it.
I don't see a way around this no matter if your in USA or Canada

Northern is referring to tax credit that some states give you eg, if you are trading a 10k car and buying a 20k car you are only taxed on 10k since you already paid taxes on the first car. if you are trading a lease you do not get tax credit. unless you buy it out first. So you can buy it out then trade it to get tax credit on the trade but it wouldn't make sense because when you buy it out you will still have to pay taxes on the residual...

Yeah that will vary by state here. In many states the use tax is paid monthly on top of the payment, so there is no credit to be had. If you pay the tax up front (which kind of kills the appeal of a lease imo) then i believe you still get a tax credit for the trade without buying first. That also could vary by state.

 

[Northern 4Runner]

Yeah that will vary by state here. In many states the use tax is paid monthly on top of the payment, so there is no credit to be had. If you pay the tax up front (which kind of kills the appeal of a lease imo) then i believe you still get a tax credit for the trade without buying first. That also could vary by state.

It would kill the appeal on the first lease, but every subsequent lease you wouldn't pay tax as the trade in value would more than cover the depreciation (basically what you pay for in a lease).

I'm no tax expert, but paying tax monthly or paying it up front and dividing it by your monthly payments sounds like it would be the same to me.

 

[bofa]

It would kill the appeal on the first lease, but every subsequent lease you wouldn't pay tax as the trade in value would more than cover the depreciation (basically what you pay for in a lease).

I'm no tax expert, but paying tax monthly or paying it up front and dividing it by your monthly payments sounds like it would be the same to me.

If you are paying it up front you are either 1) paying out of pocket which has an opportunity cost or 2) financing it meaning you are now paying interest on it.

To be honest, im not following your tax example so im not sure if its different up there. There are generally 3 scenarios:
1) You pay a monthly use tax. Its not financed, its just a monthly payment to the state that is facilitated by the lender. In this case there is no tax credit in any scenario.
2) You pay tax up front on the use value (basically the expected depreciation). This is either paid in cash or financed. If you were to trade it early you may be entitled to a credit based on the unrealized use value. Say your original term was for 10k of a 30k vehicle and you traded it in 8k into the term. Some states may give you credit for that remaining 2k, however youd still owe taxes on the next vehicle if the new use value is more than 2k. If the next vehicle had the same terms, your tax would be on 8k.
3) You pay tax up front on the full retail value (yuck). Different states may calculate the credit differently (or might not even give you one). It could be based on the residual + unrealized use value or the value at time of trade. Its hard to keep up with all of the states, so i definitely recommend researching. Lets say best case, the same vehicle is now worth 27k, if you lease a new vehcile with same terms, you'd still owe tax on 3k. There are zero circumstances in which you get away with not paying any tax. These vehicles have high residuals but not 100% Whether or not you want to pay that with your positive equity (aka cash) is up to you.

 

[MattAK]

I'm leasing mine right now with plans on buying it out at the end of the lease (which is good since I'm WAY over my miles). I asked the dealer when I leased it about modding and they only told me not to do anything major to the engine (they specifically said no turbos or aftermarket superchargers :lmao: ) and no cutting body parts like for a slimline bumper. Otherwise they said I could mod away whatever I wanted. I'm not planning on doing anything that's not easily reversible just in case.

 

[FrontRange4Runner]

Here's what people miss, you don't have to turn your lease to Toyota, infact that's about the stupidest thing you can do if you're leasing something that holds its value such as a 4Runner. At the end of your lease you can trade it in as if you've owned it. Most likely your residual is set at around 25-27k. And chances are even on a trade in value it'll be worth 30k mind you as long as suspension is back to stock. So you can mod away as long as you turn to stock at the end and trade it, you don't even have to revert to stock but it will fetch you most $$$.

I'm in the same boat and I sell em for a living, in fact I am about to trade my 16 TEP lease to a 17 TEP simply because I have equity and I can lower my payment. So go ahead man mod away.

Excellent info. I had no idea you could do this.

 

[deedubb]

I'm leasing my 16 trail premium kdss, all we get in Canada is premium model. I did it to see if I like it, and would want to keep it long term. I'm leaning towards keeping it, but 2.5 years left on lease, so we'll see how I feel then. I plan on levelling it with bilstein 5100's and better a/t tires

Either keeping it or not I will be buying it out at end of lease as its only $24k buyout and sr5's are listed for 34-36k where I live. So my trail edition should fetch at least that $$$

Don't worry about mods as with 4runners and Tacoma's you almost always have positive equity at the end of your lease. Buy it out then either keep it or make a deal on a new one.

Same situation here. At end of my lease, no way I'll turn in that "equity" and let someone else pocket that money. I'll buy it out and keep or buy it out and resell. That said, I mod what I want to

I am in a "simple lease"

 

[jwkilgore]

I'm not looking for a like for like replacement to my lifted JK. They are apples and oranges. In reality, I don't use the full capabilities of my JK any more. A well built 4Runner will meet 80% to 90% of my needs.

Keep in mind that if these mods are for actual off-road use any damage to the vehicle will have to be repaired before returning. Or if you trade-in the damage will GREATLY reduce value.

Tires are a wear item, and replacing OEM roof-rack, springs and shocks are easy. Heck, the drawers will help protect the interior and you'll be returning shocks and springs with zero wear. But body damage and trail pin-striping will kill your value. And if you lease a Limited be aware of the low-hanging front, rear, and rocker trim that tends to snag and break on moderate off-road obstacles (unless you replace that also).

My lease buy out on a 3 year old 4Runner is roughly 10k less than what I can sell it for. So if I do a deal on another new vehicle I just made 10k in positive equity. Not many vehicles can do this. Tacoma is the only other I know of. So if I want I can have a new vehicle every 3 years for cheap payments because of the positive equity and not paying tax on the new one because of the trade in

OR... you could buy a vehicle, pay it off in 3-4 years, then have zero payments for the next decade/250k miles with little to no maintenance costs. If you need to keep a new vehicle (Realtor showing clients around, etc.), then go for the lease. Otherwise you're wasting money on vanity.

But that's just me. Some people just want all the new things.


That said, the OP's situation does make sense. Really interested in the redesign, but can't wait and don't want to purchase a first-year version. So lease now. Then in 3 years decide whether to keep the lease or trade it in on a second-year version of the redesign. Financially it would of course be better to keep the older vehicle, but if the redesign is worth it then you won't be out too much money.

 

[bofa]

OR... you could buy a vehicle, pay it off in 3-4 years, then have zero payments for the next decade/250k miles with little to no maintenance costs. If you need to keep a new vehicle (Realtor showing clients around, etc.), then go for the lease. Otherwise you're wasting money on vanity.

But that's just me. Some people just want all the new things.

We probably dont need to get into the "whys" of leasing. Different strokes for different folks, and there will always be valid arguments for both sides. The main consideration for a high residual vehicle like a 4R should be the rate though, which doesn't often find manufacturer support.

Otherwise a lessee could just as easily save up what they arent paying monthly for a 3-4 year traditional loan and buy it out if they really wanted to. It could actually be cheaper in certain scenarios.

 

[SnowTrail]

My lease buy out on a 3 year old 4Runner is roughly 10k less than what I can sell it for. So if I do a deal on another new vehicle I just made 10k in positive equity. Not many vehicles can do this. Tacoma is the only other I know of. So if I want I can have a new vehicle every 3 years for cheap payments because of the positive equity and not paying tax on the new one because of the trade in

Try an FJ it would make you cry, Fj's that were leased 3 years ago with a selling price of 31-32k are fetching 30-31k on a TRADE IN VALUE 3 years and 40k miles later. I kick myself every time we trade one in for not getting one myself, damn thing is like a house only builds positive equity.

 

[Northern 4Runner]

zero[/I] payments for the next decade/250k miles with little to no maintenance costs. If you need to keep a new vehicle (Realtor showing clients around, etc.), then go for the lease. Otherwise you're wasting money on vanity.

But that's just me. Some people just want all the new things.

If you can afford to pay for a $50K vehicle in 3 years I say fill your boots.

I got 0.9% financing, so any way you slice it I am paying that 50K in the end (if I buy out lease) and @0.9% I am not paying back that much interest for the convenience of not having an astronomically high car payment.

For an example, A 2017 TRD off Road 4Runner

Lease 39 months $767/month
Finance 36 months $1625/month.

If i wanted to i'm sure I could pay $1625 a month, but I'd have to give up a few extra things I enjoy like my ATV, Side by Side, Snowmobile, motorcycle, activities with the family, hockey etc etc etc...



As for the un-clarity over taxes, I might have confused some people.
When I leased my 4runner, I financed the depreciation (The Total vehicle price minus the Buyout price) So say 43K-24K=19K. Tax on 19K (15% for me)=21,850. So that's the number my bi weekly payments was calculated with.

Buying out a vehicle means you have to pay tax on the vehicle at the end of the lease to put it in your name and for you to gain any positive equity the vehicle may have.

When I said even if you were to break even on your trade in value after this, I meant the post tax buyout value. SO in my case $27,600 (24K +15% sales tax) this would net you a tax savings on $27,600 which would be more than the tax you paid on the $24,000 to put vehicle in your name. (that's also if the next leased vehicle has a financed amount high enough to use all the $27,600 as a tax credit)


Moral to the story The 4runner, if you lease it, is 99.9% of the time beneficial to the leasee to buy it out and make a trade in deal on a new vehicle (if that's what you want to do) as it will lower your payments; either leased or financed

All good info here that is useful to someone looking for more on leasing a vehicle. I know when I have questions, I search the forums and appreciate a good discussion on a subject matter of interest.

 

[Northern 4Runner]

Try an FJ it would make you cry, Fj's that were leased 3 years ago with a selling price of 31-32k are fetching 30-31k on a TRADE IN VALUE 3 years and 40k miles later. I kick myself every time we trade one in for not getting one myself, damn thing is like a house only builds positive equity.

Where I live tacoma's are like this. A 2014 tacoma still sells for $36K that's all they were new. THere are no FJ's newer than 2007 for sale right now, but I bet they are high too.

One of the main reasons I now drive toyota's is this reason

 

[gundrted+t4r]

Sorry about the delay. For some reason my account got flagged as a spammer and I had to create a new account.

Thanks for all the great info. I'm getting my '08 Wrangler Rubicon Unlimited appraised by my auto broker here in Denver tomorrow. Depending on how the numbers come back will govern what I do. I'm hoping for enough to put 24-ish months of payments in the bank. I would love to get a GX but I just think the payment is a little out of reach.

The auto broker I use is a huge proponent of not letting money on the table when it comes to a lease. Even if its $500, thats money in your pocket and not some else.

 

[SnowTrail]

Sorry about the delay. For some reason my account got flagged as a spammer and I had to create a new account.

Thanks for all the great info. I'm getting my '08 Wrangler Rubicon Unlimited appraised by my auto broker here in Denver tomorrow. Depending on how the numbers come back will govern what I do. I'm hoping for enough to put 24-ish months of payments in the bank. I would love to get a GX but I just think the payment is a little out of reach.

The auto broker I use is a huge proponent of not letting money on the table when it comes to a lease. Even if its $500, thats money in your pocket and not some else.

If you're bringing that kind of equity from your 08 wrangler, ask your broker for quotes on one pay lease and multiple security deposits leases. if it works out you can save tons on your APR.

 

[gundrted+t4r]

If you're bringing that kind of equity from your 08 wrangler, ask your broker for quotes on one pay lease and multiple security deposits leases. if it works out you can save tons on your APR.

I have heard or single payment leases and I think I could swing that. I haven't heard of multiple security deposit leases? What are those?

 

[bofa]

I have heard or single payment leases and I think I could swing that. I haven't heard of multiple security deposit leases? What are those?

Im sure your broker will tell you this, but its crazy to prepay a lease.

 

[LandCruiser]

Im sure your broker will tell you this, but its crazy to prepay a lease.

I've had company cars where they sometimes prepay early for tax reasons, but never the entire amount. That's ludicrous.

 

[SnowTrail]

I've had company cars where they sometimes prepay early for tax reasons, but never the entire amount. That's ludicrous.

you'd be surprised, you take a money factor from .00210 to .00110 and youre saving upwards of 3800 on the cost of that lease, plus no need for gap insurance.

 

[SnowTrail]

I have heard or single payment leases and I think I could swing that. I haven't heard of multiple security deposit leases? What are those?

TFS allows you to put upwards of 9 security deposits on a lease, a security deposit is equal of 1 monthly payment and reduces your apr by .00008. 9 security deposits would be upfront money equal to 9 of your regular payments and end up reducing your money factor by .00072, which translates into roughly 50 dollars per months. this money you get at the end of your lease wether you buy it out or trade it even if you return (which you shouldnt) as long as the car is in good condtion. from the past i can tell you it ends up being 4500 upfront that you get at the end which saves you upwards of 2200. better than money sitting in the bank earning you nothing, here it is earning you upwards of a 50% return.

 

[bofa]

you'd be surprised, you take a money factor from .00210 to .00110 and youre saving upwards of 3800 on the cost of that lease, plus no need for gap insurance.

.00210 is essentially 5%.. if thats the MF you might as well do traditional financing. Rates in the low 2s are still fairly common right now.