Last post on May 21, 2013 at 6:44 PM
You are in the Prices Paid - Buying & Leasing Experiences
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Audi A4, Car Leasing, Sedan, Wagon
#1401 of 4287 Re: Lease vs. Buy Conundrum [cars0153]
Jun 08, 2007 (8:55 am)
I have owned a 2003 A4 before and liked the car, but it was when I could get a smokin' deal on the borrowed money, like 1.9% interest offer. I don't think that hitting a $18,500 residual will be too tough. There was a lawyer that posted something about leasing through Audi Finance as a bad idea because of not being able to sell the car to someone else without getting hit with taxes twice. I am not worried about that, plus it is not true...A lease needs to be thought of as a rental, not a purchase of an item, yes you are getting taxed on the lease payment throughout the course of the lease, but that is expected, as you would have to pay sales tax on the transaction to rent a car for example. What you are getting taxed on when you buy the car for the residual is the residual value of the car, in this case, $18,500.00 which is what you would pay if you bought the car outright anyway, but the taxable amount would be based on the market value of the car today. Audi isn't some special lease company that comes up with their own rules to screw a customer, it is simple business. Being a lawyer, I would hope that the Bumsville, Idaho Cosmotology, Tire, Community College and Law School Center he went to to get his Law Degree would have taught him the difference between a loan and a lease agreement, but I have overestimated lawyers before. Off the rant and back to what I was saying, so yes, if you buy the car from the dealer at that time, there will be taxes, i.e. transfering the car from the dealer to you, since it was a "rental" from the dealer to you, then there maybe another tax situation depending on who you sell the car to at the time depending on the party you sell it to and how straight edge you are with those types of transactions. Anywho, lease does look better in the numbers...
#1402 of 4287 Re: Lease vs. Buy Conundrum [raudiaudi]
Jun 08, 2007 (9:35 am)
That was a nasty reply to someone who was correct about Audi lease exclusionary pricing and explained it multiple times quite well.
Not necessary. Bad manners, too.
Audi will not sell the car on buy-out price defined in lease agreement (residual value + remaining payments less interest) to anyone BUT the lessee. That is the difference he finds in Audi from other auto cos. Audi will quote a higher price if a 3rd party wants to buy the car. Other auto cos. in his research have indicated that a 3rd party could buy a car from them off of a lease to you at that agreed price and this would enable you to escape tax burden by having to buy the car and re-sell it to 3rd party....
The tax occuring twice refers to something that is true on most leased cars in most states. If I buy my Audi today I pay remaining tax owed and then if I sell it tomorrow to another party they pay the tax on the amount they pay me, too. That is not exclusive to Audi, though. There are clever ways to get around this in some states. What is exclusive to Audi according to the poster and guarantees this tax situation is their refusal to sell to a 3rd party for the same (possibly attractive) price as they have agreed to sell it to you in their lease agreement. It is not as though they get the tax money so it is just a way to encourage you to stay in the leased car by making it financially unattractive to get out of the lease. Either you have to buy the car and re-sell and pay tax or a 3rd party (non Audi dealer or your next door neighbor for example) has to pay more unattractive price to buy out from Audi and then they pay tax once on their transaction (if it is private party - but if it is a dealer - then no tax will be paid until the car is sold to another private party by dealer.)
What part did you not understand?
#1403 of 4287 Re: Lease vs. Buy Conundrum [raudiaudi]
Jun 08, 2007 (1:58 pm)
I will take the high road here and simply agree with what Audihorse posted. Raudiaudi, you seem to have a complete lack of understanding of how the transaction is going to work, but in any case, go for it and see how it turns out for you. It seems no efforts to simplify will enlighten you.
Just don't call me in three years for help when you decide to buyout your lease from the "dealer" and finally figure out how the transaction will work.
#1404 of 4287 Re: Lease vs. Buy Conundrum [audihorse]
Jun 08, 2007 (2:06 pm)
For further clarification regarding tax liability on a lease buyout for anyone interested, in California there is an exemption to avoid tax liability on a lease buyout if you resell the car within ten days of taking ownership. The condensed timetable makes this a difficult but not impossible timeframe to comply with if you have a buyer you can trust lined up.
This will avoid tax liability on the lessee's part and allow the lessee to resell to a third party at the favorable lease buyout price (or higher to turn a profit).
Tax laws vary state to state however.
#1405 of 4287 Re: Lease vs. Buy Conundrum [audihorse]
Jun 08, 2007 (2:26 pm)
What RaudiAudi (and I) don't understand is why the lawyer, who contends he knows about contracts because he is a lawyer of some sort, signed a contract which he can't comply with. As previously pointed out, if the lawyer signed a contract he is bound by the conditions of that contract. If the lawyer chooses to sell the car in violation of the lease terms, the contract allows for Audi to penalize him in some manner - as all leasing companies do in one form or another. If you can give me a cite or a link to a leasing company that does NOT penalize one for selling a car out of a lease, please do.
Or, if the lease allows him to sell to a third party but at a higher buyout fee, he has to perform that contract term because ... he signed the contract. So if Audi wants to keep you in a lease for their business purposes (which I think we can assume they know better than the consumer), they can penalize him for breaching that lease by selling the car to a third party. Maybe some companies will let the lessee sell the car to some third schmoe for the remaining payments and residual, but the lessee will still owe them a fee. Otherwise, what is the incentive to stay in the lease?
If Audi has violated the terms of the lease by requiring a higher buyout than the lawyer contracted for, then the lawyer has a cause of action against Audi. But it appears that Audi is not violating the lease as the lawyer does not mention litigating the issue (and if a lawyer would not litigate, who would?) Again, if they penalize him beyond the terms of the contract, the lessee has legal redress. Indeed, he could get attorney fees under truth in lending laws.
I don't think Raudi was following the tax argument of the lawyer. The lawyer is indeed hosed by the tax circumstances he got himself into. The lawyer never did respond to my suggestion to trade or sell the lease itself. As I said, if one don't understand the risks inherent in a lease or have an uncertain income ... one should not enter a lease.
#1406 of 4287 Re: Lease vs. Buy Conundrum [edwardsf]
Jun 08, 2007 (2:40 pm)
I think the attorney was just suggesting that it would be good to be aware of Audi leasing terms, including the buy out agreement. Sometimes humans only learn by doing something once and then want to help others not make the same mistake or to at least warn others of not so obvious considerations in the equation.
He did not say he thought he had a case against Audi - just that he objected to their terms and would not lease again from them.
#1407 of 4287 Re: Lease vs. Buy Conundrum [edwardsf]
Jun 08, 2007 (3:42 pm)
Here we go again. Could you demonstrate less understanding of basic contractual terms? Please stop doing people a disservice by blatantly misrepresenting my statements and the details of the transaction.
"What RaudiAudi (and I) don't understand is why the lawyer, who contends he knows about contracts because he is a lawyer of some sort, signed a contract which he can't comply with."
Huh, when did I say that. Of course I can comply with the contract. The contract contains no terms stating that the buyout price will be different for a third party or dealer than it will be for the lessee, regardless of when that buyout is made. And, FWIW, so those reading can guage respective credibility of the posters, I am an attorney who drafts and negotiates contracts on behalf of businesses on a weekly basis.
"As previously pointed out, if the lawyer signed a contract he is bound by the conditions of that contract. If the lawyer chooses to sell the car in violation of the lease terms, the contract allows for Audi to penalize him in some manner - as all leasing companies do in one form or another."
Selling the leased car, i.e. paying Audi the lease buyout price IS NOT A VIOLATION OF THE LEASE. Let me state again, a lease buyout is NOT A VIOLATION OF THE LEASE. To the contrary, it is explicitly authorized by the lease provisions. ALL LEASES allow you to buy out the lease at the end at the residual price. Virtually ALL LEASES allow you to buy out the lease prior to lease end by paying the residual plus remaining payments. Why do they? Because the money they make on the lease does not change based on whether you buy out the lease on day 1 or the last day. In fact, I am sure they would rather have you pay it all on day one, so they can access the money sooner rather than later. Since the interest is already built in to each payment, this would simply give them access to your capital sooner.
"If you can give me a cite or a link to a leasing company that does NOT penalize one for selling a car out of a lease, please do."
First, it is not "penalizing" for selling a car out of lease. It is the practice of disparate lease buyout price (as stated in the lease terms) based on who the purchaser is. As for leasing companies that don't do this, Honda, Acura, Ford don't. From what I understand, a Ford dealer will do the third party buyout for you at no charge as a courtesy. When I inquired about Audi doing the same, multiple Audi dealers told me that Audi will jack up the price on them to.
"Or, if the lease allows him to sell to a third party but at a higher buyout fee, he has to perform that contract term because ... he signed the contract. So if Audi wants to keep you in a lease for their business purposes (which I think we can assume they know better than the consumer), they can penalize him for breaching that lease by selling the car to a third party."
Again, you don't understand. First, the lease doesn't "allow" or disallow the lessee from selling the car to anyone for obvious reasons, as the lessee does not own the car, so inclusion of such a term would be nonsensical. Second, the lease does not "penalize" the lessee "for breaching the lease by selling the car to a third party". The lessee cannot sell the car without buying it first. Once the lessee buys the car, he or she can do whatever he or she likes, and Audi does not and could not penalize that transaction becuase they have no privity of contract with the third party. Moreover, the contract is silent as to the terms for selling the car to a dealer or third party, as opposed to selling it to the lessee.
"Maybe some companies will let the lessee sell the car to some third schmoe for the remaining payments and residual, but the lessee will still owe them a fee. Otherwise, what is the incentive to stay in the lease?"
More nonsense. The buyout price is the buyout price, and most companies will allow you or a dealer or third party to buy the car out at the same price. The buyout terminates the lease. You don't own a "fee" after a lease buyout, regardless of the purchaser. That is why it is called a "buyout", not an early lease termination.
"If Audi has violated the terms of the lease by requiring a higher buyout than the lawyer contracted for, then the lawyer has a cause of action against Audi. But it appears that Audi is not violating the lease as the lawyer does not mention litigating the issue (and if a lawyer would not litigate, who would?) Again, if they penalize him beyond the terms of the contract, the lessee has legal redress. Indeed, he could get attorney fees under truth in lending laws."
Complete misquote and fabrication. Not once did I state Audi was breaching the express terms of the contract. Please point out for all of us where I ever said that? You should choose your words more carefully. What I stated was that there is no provision in the contract explicitly stating that Audi will charge a dealer or third party more than the lessee for the identical privilege of buying the car from them. The contract is silent on that term. It is counterintuitive that Audi would do this, as evidenced by the fact that are so far the only company I have found that does this. It even angers Audi dealers. It is simply a policy designed to increase their bottom line. While Audi contracted to sell the car to you for X, they figure hey, why not try to get X + Y if we can, and we don't care at whose expense. That is a business decision Audi makes. Other leasing companies DO NOT.
"I don't think Raudi was following the tax argument of the lawyer. The lawyer is indeed hosed by the tax circumstances he got himself into. The lawyer never did respond to my suggestion to trade or sell the lease itself. As I said, if one don't understand the risks inherent in a lease or have an uncertain income ... one should not enter a lease."
I am not "hosed" as you state due to the provisions of California law permitting one to avoid tax liability if a car is purchased for resale and the transaction is completed within ten days. However, many states do not have such a provision, and the complexity of the third party buyout and unfamiliarity with it (because of Audi's unique refusal to sell to a dealer or third party) by most lenders/dealers makes the transaction convoluted and time consuming. Moreover, when you say the "tax circumstances he got himself into" - you do realize you are talking about State tax laws that every lessee is subjected to right? This is not some special deal for me. Thus the reason for my post in the first place.
#1408 of 4287 Re: Lease vs. Buy Conundrum [edwardsf]
Jun 08, 2007 (3:51 pm)
Regarding your attempt to equate the validity of my post with whether there is pending litigation is silly. Certain hostile business practices are legal, others are illegal. You can choose to do business with whomever you like. It is certainly not illegal to charge someone MSRP on a car, and if you don't mind the practice, feel free to buy the car at MSRP.
Regarding legality, while I question whether this practice violates California Unfair Business Practices Law, considering in the end I will incur no damages as a result of this hostile practice other than lost time, there is no reason to litigate. Even if I were to incur a loss by having to pay a dealer or third party a premium to purchase the car from Audi at an inflated price, it would not be worth my time to litigate as the loss would be under $2,000.
Regarding your comment of the litigiousness of lawyers, behind every sleazy lawsuit is a willing client.
I posted this in the first place because others may not be so lucky in avoiding double taxation depending on their state of residency and familiarity with tax laws. Others may have a change in circumstances that requires them to try to exit their lease and get into a different car (whether it be having children, loss of life, change of job, etc...)
Audi has chosen to pursue a practice that benefits them at the expense of the lessee. This practice is not disclosed in the lease agreement. This practice is not done by other leasing companies. Whether it is legal or illegal really isn't the point. You can choose to do business with whomever you like, but you should know all the facts prior to making your decision.
Oh, and by the way, in response to your equestion regarding "selling or trading" the lease, and why I did not respond to that suggestion, the answer follows. As if it were not obvious, why would one ever trade a lease with one month remaining. Your suggestion made no sense.
However, just so everyone is aware, you cannot assign your Audi lease to a third party (through leasetrader or other similar programs) in the last 12 months of the lease. Most lenders do not have this restriction, some have a sixth month restriction. Moreover, you remain liable for the lease even after the lease is assigned to the third party (unlike many other lenders, who allow a clean assignment).
Just more food for thought for those considering an Audi lease.
#1409 of 4287 Re: Lease vs. Buy Conundrum [mcwenzel]
Jun 08, 2007 (10:08 pm)
Here is a good example of someone's experience with this matter.
Don't worry, I won't be calling you in three years, the liars....I mean lawyers I deal with know the difference between to, two, and too.
". When I inquired about Audi doing the same, multiple Audi dealers told me that Audi will jack up the price on them to."
I know you aren't in a lawsuit, and I know you aren't trying to get out of a lease agreement early. The double taxation thing is still muddy waters for some people, even in the article I have linked into this posting. She is going for the State Taxation Board for a double taxation claim, which is BS. She did not buy the vehicle until the end of the lease, where she should be taxed on the residual price of the vehicle plus any applicable fees she agreed to. Now whoever buys it after her purchase must pay sales tax on their purchase of the vehicle from her. So no double taxing is going on. If there was better resources on this forum, I would draw a diagram with cute stick figures and all. I understand leases, loans, and taxation. In this article, she discovered what a dealer would do to either help or hinder a third party in obtaining the vehicle. If the residual was 15k and the market of the vehicle held strong at 18k, I would like to meet the SOON-TO-BE-FIRED Finance Manager at a dealership that would turn away, plus AID in the effort to get the third party in the vehicle for 15k when they could make so much more by telling both parties that it can't be done, then taking the third party and selling them a car for about the same price he had worked out or maybe a little less. In this case, the dealer also has the lessee by the you know what because if the lessee was over mileage or past normal wear and tear, they just took the lessee's get-out-of-jail-free card away and now they can charge the lessee the appropriate fees when he is now forced to turn the vehicle into them since they took away his buyer--Just playing the devil's advocate that always chases the dollar. Situation #2 is that the market of the car actually is 13k and your buy out is still 15k, which is more likely with most brand of manufacturers over Audi (greater depreciation rate per year, rather than the roughly %12 Audi currently maintains), so your third party would be an idiot to step in the finance room to make that deal with you. So the black and white has been established here, but now there is a grey we haven't even talked about. First Audi has a Premier Purchase Plan, after skimming through the rules, it seems like they put the title of the vehicle in your name from day one, but treat it much like a lease, so I hate to use the arse-out-of-u-&-me word here, but I would assume there is a sales tax situation wrapped up in the program somewhere, maybe even before the term end. So this is also a purchase, with some lease restrictions with a balloon payment at the end for the purchase of the vehicle, which eliminates the taxation at the end, again I am only assuming. The gray area also has the down and dirty idea of buying it from the dealer, with your money (which is better) or money fronted by the third party, then selling it to your third party for say 1k, which you can put on the title when you sign it over to him on the back of the document or in a bill of sale note, but don't put down "gift", b/c the DMV in most states have caught on to this and will go with market value of the vehicle. He pays virtually nothing for taxes and you have payed tax once. If the DMV is curious about this, the third party can say it was a "favor" deal, happens all the time. For the rest of the amount come to an agreed understanding of why this helps the two of you out and plan out the rest of the payment plan.
-"You don't know what they don't know."
P.S. I would recommend doing it this way since the poster of the article referenced in this reply tried to comply with California Law and the whole ten day policy and she still ran into snags. No surprise there, state officials make the law and they still can't interpret it correctly for the people of which it governs.
Ye have little faith, no, Ye have no faith!
#1410 of 4287 Re: Lease vs. Buy Conundrum [raudiaudi]
Jun 08, 2007 (10:59 pm)
Well, thanks for clearing that up. If anyone can interpret this post for those of us not in a drug induced haze, I would appreciate it. Next time consider paragraphs.
Again, Audi charges MORE to sell the car to a dealer than they do the lessee. Other leasing companies do not do that. That was my original premise, and you have not disproved it.
Regarding buying the car "from the dealer" as your "gray area", you can't buy the car from the dealer unless the dealer buys it from Audi first. And guess what, the price the dealer can buy it for is a special increased price that exceeds your residual. So sure, give up your residual price, have the dealer buy it for $1500 more, and then buy it from the dealer, and then sell it to a third party. Yeah, that makes a great deal of sense.
Regarding the third party process in california, I read the same article. The author fails to mention numerous ways to avoid ever having to go to the DMV, which begin with signing a limited power of attorney with your lender to allow them to move title directly from the manufacturer, through you, to the third party. I have no idea why the author paid sales tax to a dealer, particularly when California law is clear that if purchasing for resale within ten days, no tax liability is owed.
What little value I did glean from your post simply supports my point, so I have to thank you. What is so easy to do with many lenders is extremely difficult to do with Audi (and apparently difficult to do with Nissan). You finally understand.
Regarding the Audi Premier Purchase Plan, sure, you can go that route, but not only will your payments be higher than if you had a lease, but you also can only select 15k miles a year. Great plan. And note was is not in the details of the PPP. Whether a third party or dealer can buy the car for the same balloon payment. I have a pretty good idea what the answer is.
So it seems your solution, and correct me if I am wrong, is to buy the car from a dealer at a premium well over your residual (because that is the only way you can buy the car from the dealer), and then commit fraud in the title transfer to the third party, rather than simply applying for a refund with the State Equalization Board?
Wow, and people hold lawyers in low esteem. I highly, highly recommend you don't follow this advice. Simply complete the transfer within ten days in California or suck it up and pay the tax. In other states, check the taxation laws.