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I got a question though. If you pay taxes on the monthly payment, don't you pay taxes on the interest they charge you? If they let you pay taxes upfront, won't you save some money? Not much, but still...
That's correct... while you only pay tax as you use the vehicle, you do pay taxes on the interest they charge, which many would argue isn't right. In no other type of business transaction do we pay sales tax on interest or finance charges. This is an area for improved state tax legislation.
They don't allow pre-pay of taxes in California. Your only option is to pay sales tax on the monthly payment itself each month. The exception being any down-payment that you make at lease inception which they will charge sales tax on. Just another reason why you should never put any money down on a lease - not only are you paying taxes up-front on that payment, if your car is totaled in an accident, you will never get that down payment money back. For example, let's say you put $3,000 down as a cap reduction. Five months later the vehicle is totaled in an accident. You'll pay your insurance deductible and your insurance company will pay its portion of the lease payoff and Gap Insurance pays the remaining balance. You will never recover your $3,000 down payment. That money can never be returned.
I realize some states charge the full sales tax value up-front, but what happens if you total your car two months in to your 36 month lease? Do you get that pre-paid tax back? If the answer is no, I wouldn't ever want to do that even if I had the option.