Leesbro63 wrote:That's interesting. But IN THE REAL WORLD, how does this all play out? Are large downpayments on leases the norms (to cover the sales tax)? Are the payments higher than in other states? Do people avoid leasing in Texas because of this penalty? Is there some sort of alternative financing "deal" that is the "Texas alternative" to leasing?
No, they still lease here in Texas because people are stupid and want a fancier car than they can otherwise afford....just like everywhere else in the US. Typically what the dealer will do is fold the tax into the monthly lease payment so you are in effect borrowing the amount of the sales tax payment from the dealer and paying it back monthly over the 24-month lease period. This means your up-front cost to lease a car isn't really different compared to other states, but the monthly lease payment will be $25-50 higher to pay for the financed tax payment. Here's a good explanation:http://www.leaseguide.com/Articles/texas-auto-lease.htm
BTW, this is not just a Texas issue. Arkansas, Illinois, Maryland, Oklahoma, and Virginia also charge sales tax on the entire price when leasing.