Should I Buy or Lease?
Sales Tax Benefits Of A Car Balloon Finance Versus a Lease
Leasing a Car:
If you are considering leasing a car in Georgia, you should know that you will be paying the full sales tax on the car as a part of your monthly payment. For instance, if you are leasing a car that:
- Costs $30,000.00
- $16,000.00 residual
- For a term of 36 months
Using a sales tax rate of 7%, your sales tax liability should be about $2100.00. That does not seem fair when you do not own the vehicle, nor are you going to be using the vehicle for longer than 36 months. Another problem arises when you want to buy out the car at the end of the lease and then you have to pay the full sales tax on the residual value of the car. In our example above, your sales tax would be another $1120.00 ($16,0000 x 7%).
Balloon Finance:
Using the balloon finance method, you would pay tax on the initial $30,000.00 (cost of the vehicle), but if you opt to purchase the car at the end of the 36 month term, then you do not pay the additional tax on the residual value of the vehicle. This method may work out better for you if you may end up purchasing the vehicle after the lease period.
Important note on interest:
You are paying interest whether you are leasing, financing, or opting for a balloon finance. Make sure to factor those costs into you decision when choosing your vehicle.
Sales Tax Benefits Of A Car Balloon Finance Versus a Lease
