Lease Buyout - was: (Who pays for $7500 when leasing?)

[Gonewild]

I called NMAC and they said the I have to go through the dealer because I live in CA. I am ready to pay it off, Nissan said go ahead, but dealer says wait 90 days. Very frustrating! There is no prepayment penalty, just the $300 Purchase option fee. I'm not sure what other options I have.

Question when you buy it out don't you have to pay all back payments? If so why not wait until 36 month is over.

 

[davewill]

UPDATE:

So, Boardwalk is willing to convert the lease into a purchase. This is not a buyout of the lease, but an actual conversion to purchase. So, the price will be like buying the car with cash. So, the $7500 question will be, will I still qualify for the credit at the end of the year? Dealer said yes since I am buying it new, not used. This is a bit tricky and it now shifts to uncle sam. I will ask the dealer if the lease becomes null. Any accountants out there, anyone familiar?

Qualifying for the tax credit will be no problem...just so long as you have a big enough tax liability to take the whole thing, and are willing to wait for tax refund time to collect.

 

[trentr]

Qualifying for the tax credit will be no problem...just so long as you have a big enough tax liability to take the whole thing, and are willing to wait for tax refund time to collect.

Thanks, Boardwalk will nullify my lease. So it will be a new purchase, start from scratch. Yes, I will increase my earnings this year to get the whole credit. My new question will be how can I get the $7500 credit and $2000 child credit at the same time. Is this even possible? I know if total annual income of ~$150K, child credit is gone. My tax liability last year was ~$7K and got the $2K child credit.

 

[Jimmydreams]

Qualifying for the tax credit will be no problem...just so long as you have a big enough tax liability to take the whole thing, and are willing to wait for tax refund time to collect.

Thanks, Boardwalk will nullify my lease. So it will be a new purchase, start from scratch. Yes, I will increase my earnings this year to get the whole credit. My new question will be how can I get the $7500 credit and $2000 child credit at the same time. Is this even possible? I know if total annual income of ~$150K, child credit is gone. My tax liability last year was ~$7K and got the $2K child credit.

With so many questions and potential traps in all this, you might be better off keeping the lease. Something tells me when this is all over, the dealer will be happy, you'll be talking to the IRS, and your wallet will be asking "WTF?" :?

 

[davewill]

My new question will be how can I get the $7500 credit and $2000 child credit at the same time. Is this even possible? I know if total annual income of ~$150K, child credit is gone. My tax liability last year was ~$7K and got the $2K child credit.

The only thing I know about the child care credit is that it's refundable, meaning that unlike the EV one, you don't have to have a matching tax liability to claim it. Some people, with little or no income, file a return just so they can get that $2000. I have no idea how they might interact. Would the $2000 come off your tax liability before you could claim the $7500?

There was a thread around here somewhere that delved into the tax rebate in a lot more detail, including amount of income you needed to end up with a $7500 tax liability, search around.

 

[davewill]

With so many questions and potential traps in all this, you might be better off keeping the lease. Something tells me when this is all over, the dealer will be happy, you'll be talking to the IRS, and your wallet will be asking "WTF?" :?

I was thinking the exact same thing. He already HAS the lease, and I don't think, if push comes to shove, that the dealer can legally prevent his paying off the lease whenever he wants.

 

[Desertstraw]

With so many questions and potential traps in all this, you might be better off keeping the lease. Something tells me when this is all over, the dealer will be happy, you'll be talking to the IRS, and your wallet will be asking "WTF?" :?

I was thinking the exact same thing. He already HAS the lease, and I don't think, if push comes to shove, that the dealer can legally prevent his paying off the lease whenever he wants.

IRS told me that if the dealer sells the car in less than three years, they will recapture the $7,500 tax credit from the dealer. Under those circumstances, what dealer will let you just pay the residual before the three years are up?

 

[TEG]

IRS told me that if the dealer sells the car in less than three years, they will recapture the $7,500 tax credit from the dealer. Under those circumstances, what dealer will let you just pay the residual before the three years are up?

Whoa. Dealer was pushing me to take a lease, and then suggested I pay it off in 90 days. They said that way they would offer the $7500 right away against the lease price, and I wouldn't have to wait until next year to claim it.
But if your statement is true, and the lease payoff/buyout happens early, in 90 days (or even less) that would conceivably mess up the dealer's plans, right? Could they be giving out $7500 "discounts" and then be telling customers how they could cause the dealer to be unable to claim it? That would be a huge mistake.

Could there be some confusion about "3 months" versus "3 years"? The "pay off the lease in 90 days" was weird... Why 90 days? Perhaps they expect to get the $7500 by then? I hope (for their sake) they understand how the "recapture" can work.

 

[earther]

Boardwalk is willing to convert the lease into a purchase. This is not a buyout of the lease, but an actual conversion to purchase. So, the price will be like buying the car with cash. So, the $7500 question will be, will I still qualify for the credit at the end of the year? Dealer said yes since I am buying it new, not used.

so, that is exactly the reason why I DON'T want to convert my lease into a purchase; I don't have nearly enough tax liability to take full advantage of the $7500 credit. My hope is to buyout the lease as soon as possible. If it makes the dealership happy for me to wait at least 90 days, I'm willing to do so (but I'm slightly disinclined to do them any favors, given that I was never quoted an APR, and the money rate I was given was not as good as I was led to believe I was eligible for, and moreover I was dissuaded from putting any initial money down on the car via some misinformation from the sales rep).

 

[Coffee_Slurry]

When someone actually buys out the lease, I hope that he/she will post the final cost compared to simply buying the car.

I too would be very interested in seeing this.

My understanding (and I'm new at this) is that by keeping the Lease monthly payments, you take advantage of the "free" gap insurance that is built into the lease.

If you pay off the lease and (heaven forbid) the car is totaled the next month, your insurance will pay out less than you just spent on the Lease. Such is gap.

Is this incorrect? Overstated?

I too would like to pay off the Lease and save on the interest cost. I don't think I can earn more than 4.9% on the cash elsewhere.

 

[Desertstraw]

Why has the moderator removed my posts on my conversation with IRS??

To summarize, IRS told me that if a car with a lease is sold before three years, the IRS will "recapture" the $7,500 incentive. This moots this whole thread.

 

[Jimmydreams]

Why has the moderator removed my posts on my conversation with IRS??

To summarize, IRS told me that if a car with a lease is sold before three years, the IRS will "recapture" the $7,500 incentive. This moots this whole thread.

I just checked the moderator logs. No one removed or edited any messages from you. Perhaps you forgot to hit <save>?

 

[Navin]

This is very interesting. Probably a majority of Americans don't qualify for the full $7,500 tax credit. But if you lease, get the $7,500 discount up front then pay off in full right away you're basically turning a potential credit into an instant rebate. I can see how the IRS might not like that. I think they should turn the tax credit into an instant rebate anyway. It's simpler, everyone would qualify, and it would eliminate the problems that have happened where people with Hummers have tried to claim the electric vehicle credit.

As far as the electric vehicle credit vs. the child tax credit, the electric vehicle credit gets taken first and wipes out any tax liability up to $7,500. Then the child tax credit kicks in depending on certain income limits. If you don't have any more tax liability for the child tax credit to erase, then it becomes the "additional child tax credit" on a lower line of the 1040 and gets refunded to you--unlike the electric vehicle credit which you lose. This gets pretty complicated and there lots of exceptions and other credits, but yes it's possible to get both.

 

[Spies]

IRS told me that if the dealer sells the car in less than three years, they will recapture the $7,500 tax credit from the dealer. Under those circumstances, what dealer will let you just pay the residual before the three years are up?

First time I ever heard of this one. Do you happen to have a link to documentation about this?

 

[Desertstraw]

IRS told me that if the dealer sells the car in less than three years, they will recapture the $7,500 tax credit from the dealer. Under those circumstances, what dealer will let you just pay the residual before the three years are up?

First time I ever heard of this one. Do you happen to have a link to documentation about this?

She gave me the information over the telephone with the following references:
8834
30E5
535
These documents are available at the IRS website.

Here is a better source that I found:
http://www.fueleconomy.gov/feg/taxevb.shtml

Part of this reads:
The following requirements must also be met for a certified vehicle to qualify:

The original use of the vehicle commences with the taxpayer—it must be a new vehicle.
The vehicle is acquired for use or lease by the taxpayer, and not for resale. (The credit is only available to the original purchaser of a new, qualifying vehicle. If a qualifying vehicle is leased to a consumer, the leasing company may claim the credit.)
The vehicle is used mostly in the United States.
The vehicle must be placed in service by the taxpayer during or after the 2010 calendar year.

Also check out: IRS.gov, 11-13-06

 

[LEAFer]

IRS told me that if the dealer sells the car in less than three years, they will recapture the $7,500 tax credit from the dealer. Under those circumstances, what dealer will let you just pay the residual before the three years are up?

First time I ever heard of this one. Do you happen to have a link to documentation about this?

She gave me the information over the telephone with the following references:
8834
30E5
535
These documents are available at the IRS website.

In my understanding the tax credit accrues to NMAC (actually "NILT", Nissan-Infinity Leasing Trust) which is the Lessor (owner) of the vehicle. The dealer should have nothing to do with the tax credit, unless NILT is penalizing the dealer for the recapture (unlikely).

 

[DaveinOlyWA]

Ok so what is the confusion here. If a lease is converted to purchase then purchaser does not get tax credit because that was already discounted on the lease

 

[TEG]

I wonder if NIST and the dealership are in perfect sync on the ramifications of the $7500 for a "lease for 90 days then buy out the lease" situation. Will the IRS still allow NIST to get the $7500 if the lease is terminated so soon? Will NIST have given the dealer $7500 but then not be able to claim it?

There was a proposal to turn the $7500 credit into a point-of-sale rebate instead. If/when that happens then these questions over credit claim / recapture will likely become moot.

 

[Desertstraw]

Ok so what is the confusion here. If a lease is converted to purchase then purchaser does not get tax credit because that was already discounted on the lease

The confusion is this that the seller got the $7,500 credit on the condition that he would not sell it. IRS will demand the $7,500 back.

 

[nader]

Question: Doesn't NMAC take the the $7500 tax credit since that is who is really buying the car?