Lease buyout to a trusted private party?

[Ryanflynn]

Hey friends,

I have a 2018 MS P75D with a lease buyout of $50k coming up in a couple months. My Wife's mom wants the car, thats a screaming deal so I'd like to make it happen. Is it possible to make this a clean break, let her pay Tesla and they send her the title? Or do I need to pay off the lease and sell the car to her for $1?

Thanks!
Ryan

 

[DerbyDave]

I don't remember getting a title from the manufacturer after paying off a lease. They will release your title. Your clerk or DMV will then show a clear title that you can then sell or transfer to your mom in law, according to the standards of your state, and paying any taxes in the value of the car, if applicable. In my state, you could sell it to her for $1, but the state would collect taxes on the blue book value of the car. Only direct family would be considered for no or lower taxes. In laws are generally excluded.

 

[Ryanflynn]

Gotcha, yeah Tesla finance wants the taxes and fees paid as part of the buyout. Obviously, we can’t pay them twice. As usual with Tesla, I can’t get anyone on the phone, a call back or an email response.

 

[DerbyDave]

Gotcha, yeah Tesla finance wants the taxes and fees paid as part of the buyout. Obviously, we can’t pay them twice. As usual with Tesla, I can’t get anyone on the phone, a call back or an email response.

I think taxes will be paid twice. You owe taxes on the property you owned or leased that you possessed on January 1 of this year. Tesla may very well collect this. Then, when a buyer buys the vehicle, they have to pay for the tax on their purchase. Two separate taxes. One is a property tax -- on property owned on January 1, and the other is an ad valorem tax -- a tax on a transaction, like a sales tax.

 

[CapeOne]

Doesn't California have a law that if a lessee buys the lease car and then turns around and sells it within 10 days, sales tax only has to be paid once? The lessee pays the sales tax when they buy the car but the next person/buyer (within 10 days) does not.

 

[DerbyDave]

Doesn't California have a law that if a lessee buys the lease car and then turns around and sells it within 10 days, sales tax only has to be paid once? The lessee pays the sales tax when they buy the car but the next person/buyer (within 10 days) does not.

That would be good in this case if this is true. I don't know much about California laws.

 

[ATPMSD]

Pretty sure you have to buy the car from Tesla and pay taxes. But some States allow a transfer to a family member without having to pays taxes, check with your DMV.

 

[Drew-MS]

Gotcha, yeah Tesla finance wants the taxes and fees paid as part of the buyout. Obviously, we can’t pay them twice. As usual with Tesla, I can’t get anyone on the phone, a call back or an email response.

I'm pretty sure each state has different rules. In New York, if the lease was in my name, then I'd be the only one able to buy the car and sales tax would have to be paid. I'd then have to sell it and sales tax would have to be paid again which is ridiculous in my opinion.
There may be a way around this by you buying out the lease, pay the tax, and then gift the car to your wife's mom. And then you can work out the details (money etc.) with your wife's mom. Since it's a legitimate family member, it can probably be done pretty easily.

 

[Drew-MS]

Doesn't California have a law that if a lessee buys the lease car and then turns around and sells it within 10 days, sales tax only has to be paid once? The lessee pays the sales tax when they buy the car but the next person/buyer (within 10 days) does not.

That's how it should be but in many states including New York, tax would have to be paid twice. Unless the person who buys out the lease gifts the car to a friend or family member. Since it's a gift and there's no money changing hands, I'm pretty sure no sales tax would be owed by the person receiving the car.

I went through this several years ago. I bought out a lease, paid tax, and the person who bought the car from me that day (also in NY) had to also pay tax. It wasn't a friend or family member so it was a regular sale. The car had low miles and there were a lot of mods so my intention all along was to buy the car and either keep it or sell it.

 

[Ryanflynn]

Yeah the lease buy out is a great price for the car, but paying tax on it twice diminishes the value of the deal. I wish I could get someone on the phone!!

 

[DerbyDave]

I looked it up. Call the DMV, not Tesla. California will require the recipient (buyer) to pay a use tax unless:
"This transfer is exempt from use tax because it is a:
Family transfer sold between a parent, child, grandparent, grandchild, spouse, domestic partner, or siblings (if both are
minors related by blood or adoption)." Statement of Facts (REG 256)

Meaning if you gift, donate, or sell the car to an in-law, the in-law will have to pay the use tax on the value of the vehicle at the time of transfer of the title.

See: How to Transfer Your Car Title in California

 

[CapeOne]

Yeah the lease buy out is a great price for the car, but paying tax on it twice diminishes the value of the deal. I wish I could get someone on the phone!!

Use tax is due. If the lessee:

• Buys the vehicle at the end of the lease, use tax is based on the balance owed at the time of lease pay-off.
• Sells the vehicle within 10 days, use tax is due only from the third party.
• Sells the vehicle after 10 days, use tax will be due from the lessee and the third party.

Below is a link:

11.085 Leased Vehicles (VC §4453.5) - California DMV

Leased vehicles must be registered in the names of both the lessor and the lessee. The lessor is designated as LSR; the lessee is designated as LSE. Certificates issued in 1985 or prior may show the lessee as “care of (c/o)” (the “c/o” was part of the address field). If the input document does...

www.dmv.ca.gov

 

[Ryanflynn]

Use tax is due. If the lessee:

• Buys the vehicle at the end of the lease, use tax is based on the balance owed at the time of lease pay-off.
• Sells the vehicle within 10 days, use tax is due only from the third party.
• Sells the vehicle after 10 days, use tax will be due from the lessee and the third party.

Below is a link:

11.085 Leased Vehicles (VC §4453.5) - California DMV

Leased vehicles must be registered in the names of both the lessor and the lessee. The lessor is designated as LSR; the lessee is designated as LSE. Certificates issued in 1985 or prior may show the lessee as “care of (c/o)” (the “c/o” was part of the address field). If the input document does...

www.dmv.ca.gov

Perfect! excellent news!

 

[DerbyDave]

That third party is your mother in law. She owes use tax, not you.

 

[ALSET28]

Sorry for reviving an older thread, but I've got a related question. If you bought out a lease from Tesla and they send you the title showing the lien was released, how would you go about selling the car to a third party in MA? The assignment of ownership on the back of the title has the lease buyout purchaser information so that can't get filled out again by the new purchaser. Does that title need to be re-registered first or is it amendment?

 

[ALSET28]

Sorry for reviving an older thread, but I've got a related question. If you bought out a lease from Tesla and they send you the title showing the lien was released, how would you go about selling the car to a third party in MA? The assignment of ownership on the back of the title has the lease buyout purchaser information so that can't get filled out again by the new purchaser. Does that title need to be re-registered first or is it amendment?

Bump

 

[ATPMSD]

Sorry for reviving an older thread, but I've got a related question. If you bought out a lease from Tesla and they send you the title showing the lien was released, how would you go about selling the car to a third party in MA? The assignment of ownership on the back of the title has the lease buyout purchaser information so that can't get filled out again by the new purchaser. Does that title need to be re-registered first or is it amendment?

You have to go to your DMV and have the title transferred to you.

 

[aparpar]

Hey friends,

I have a 2018 MS P75D with a lease buyout of $50k coming up in a couple months. My Wife's mom wants the car, thats a screaming deal so I'd like to make it happen. Is it possible to make this a clean break, let her pay Tesla and they send her the title? Or do I need to pay off the lease and sell the car to her for $1?

Thanks!
Ryan

Hi @Ryanflynn, sorry to revive an old thread, but I had a question about how your situation turned out.

My aunt offered to let me buyout her MS P100 which has a buyout of around $51k, which is way too good to pass up. The CA tax law (I.e. the 10 day rule) seems straightforward enough, but I haven't been able to work out the actual logistics of it.

When you bought out the car, did both of you pay taxes- at buyout and when you transferred to her? If so, were you able to get yours refunded so they only were paid once? Or did the taxes only get paid once?

 

[Drew-MS]

Hi @Ryanflynn, sorry to revive an old thread, but I had a question about how your situation turned out.

My aunt offered to let me buyout her MS P100 which has a buyout of around $51k, which is way too good to pass up. The CA tax law (I.e. the 10 day rule) seems straightforward enough, but I haven't been able to work out the actual logistics of it.

When you bought out the car, did both of you pay taxes- at buyout and when you transferred to her? If so, were you able to get yours refunded so they only were paid once? Or did the taxes only get paid once?

Yea $51k is way too good to let it go. Even if you decide to sell it, the car is probably worth $70k+ in the used market.
Since it's your Aunt, maybe she can buy the car, pay the tax, and then gift the car to you. Of course, you will pay for the car through her. Since it will be a gift, tax shouldn't have to be paid again. CA might have different tax rules but I'm pretty sure that's how it would have to be done in NY to avoid paying tax twice.