Tips on Buying Cars: Lease return, gm supplier discount, dodge ram 1500

Question
QUESTION: Hi Jeremy! In a perfect world, we would all understand auto leasing. Since I don't perfectly understand it, I need some clarification.  I leased a 2006 Dodge Ram 1500 for 27 months with a money factor that equated to about .02% interest (effectively 50 cents a month!). Anyway, knowing my normal driving habits and whatnot, I opted for a mileage allowance of about 15k/yr. The problem is, due to a variety of reasons, I have actually only driven 9k/yr and my lease ends in 2 months. I will actually be 14k miles under the allowed mileage! While I know that I pay a mileage penalty for overages, how do I deal with the "good fortune" of under mileage? Knowing car dealers, I sincerely doubt that they will give me more than the guaranteed residual value. And anyway, I am looking at purchasing a non-Chrysler vehicle, a 2008 Chevrolet Colorado. Better gas mileage, lower payments, etc. Am I out of luck and learned a hard lesson? Or can I use this to my advantage?

Regards,
Tom

p.s. - I live in Texas and know of _some_ of the advantages given to auto purchases (tax on the difference). How can I maximize my savings?
p.p.s. - I also work for a preferred employer so I qualify for the GM Supplier Discount plan. But would I be better off negotiating my own deal?

ANSWER: Tom,

Sorry about taking so long to get to your question.  I did not receive the e-mail alerting me as to your question.

Here are the answers that you are looking for.

As far as your miles on your lease turn in, you are pretty much out of luck.  Unfortunately, they do not give you the money back on the miles that you did not use.  I wish they did.  You are a rare case, most consumers end up going over their mileage limits.  

As far as purchasing your new vehicle, if you traded your lease in, state law does not allow you to use a LEASE for tax credits if you traded it in.  Since you only paid taxes on the amount of the vehicle that you used, they do not allow you to get the tax credit on the trade in.  Therefore it would not benefit you to trade the vehicle in rather than turning the vehicle in.  Whether you purchase or lease the Colorado, it does not benefit you to trade the vehicle in because the dealer must charge you sales tax on the sales price of the new vehicle.

As far as your discount on the Supplier plan with GM, it depends on exactly what plan you are.  If you are "A" plan then no, it would not benefit you to negotiate your own deal.  If you are "D" plan then it probably would.  Ask your Human Resources person if you are considered a "D" plan Supplier Discount for GM.  Most non GM companies are "D" plan and "A" plan is generally reserved for GM employees or companies where GM owns a majority share.  If your HR person does not know the answer, you can go online to the website and look at the discount.  It will tell you once you fill out all of the paperwork if you are considered "A" or "D" plan and you will not be held to it once you fill it all out.  You reserve the right to use it or not use it, but make sure.  

Let me know if you have any other questions, and again, I am sorry for taking so long to answer your question.

Thanks -

Jeremy Beck

---------- FOLLOW-UP ----------

QUESTION: Thanks for the answers, Jeremy. Actually, your reply was faster than I expected.  Anyway, I believe you may have some of your information mixed up. While my company does have access to the Ford discount, those are the A, D, and X that you are referring to. 'A' is for Ford employees, 'D' is for suppliers and dealer employees, and 'X' is for companies like mine (major employers with many employees). To my knowledge, the GM Supplier Discount is a set price for companies like mine (similar to Ford's X-plan).
As for paying taxes on the amount of the vehicle that I used; again, I believe you are wrong. When I leased the vehicle, I was required to pay full sales tax on that vehicle. In addition, I pay a property tax for that leased vehicle every year (about $75). I've just reviewed my Motor Vehicle Lease Agreement and the numbers match up to my calculations.
Would you please doublecheck the information you have? I'd appreciate it.

Answer
Tom,

I appreciate your questioning my answers.  It's always good to be aware of the situation.  As for your first question, GM Supplier also has two different plans.  I know this because I worked at a GM dealership for many years.  Yes, you have the Employee Discount, but you also have two types of supplier discounts.  If you print out your paperwork and take it to the dealership the dealership will be able to tell you which supplier discount you have.  If you are a major company with many employees, more than likely you qualify for the better of the two.  With all of this said, I am still not convinced that you are better off taking that discount as opposed to negotiating your own discount.  Most dealerships will loose a little money to earn your business and sell another vehicle, earning them another allocation from the manufacture.  These days the name of the game is inventory and having a very good mix.  You can only do that if your turn rate is way up there, therefore giving you more allocation on vehicles from the manufacture.  

As for your second question in regards to the taxes.  I live and work in the state of Texas as well.  I have worked at several car dealerships in the state of Texas.  When you trade in a lease vehicle, you DO NOT get tax credits on the vehicle you are trading in. The dealership pulls what is called a TWIX which is the Texas Registration report.  Once the dealership sees that the vehicle is owned by the lease company and registered to you, we BY LAW must charge you taxes on the full selling price of the vehicle you are purchasing.  What this means is that the State Law says that the only person that is eligible to receive those tax credits is the OWNER of the vehicle, not the registrant.  You are not considered the owner of the vehicle, the lease company is.  You are considered the registrant.  Now, with that being said, the dealership is responsible for checking that out.  If you happen to catch a dealership sleeping at the wheel so to speak, they may not catch it.  For the dealership, this could and will present big problems if they ever get audited by the state.  The state would come in and make the dealership pay the difference that you did not pay, and any other customer that they did the same thing to.  Basically, whether you paid taxes on the full amount upfront when you purchased the vehicle or not, you are not the one that gets the tax credit, because on a lease you are not considered the owner.  Understand??  It is kind of confusing, and unfortunately in my opinion is not really fair, but it is the state law in Texas.  The property tax issue has nothing to do with the trade in tax credit.  Only certain counties in the State of Texas still charge Personal Property Tax on motor vehicle leases, and it sounds like you happen to reside in one of them, although that amount seems very small.

I hope this has answered your questions.  You can look on the State of Texas website to verify what I am saying is true about the taxes on Motor Vehicle Lease Trade Ins.

Thanks for your question, and if you have any other questions, please feel free to contact me.

Thanks -

Jeremy Beck