Tips on Buying Cars: Leasing taxes, jeep liberty, breaking the law

Question
I never leased a car before. I was looking into a 2008 jeep liberty.When I got home from pricing I notice a few things that I missed at the dealer. I was getting a 1500 rebate. First they added taxes to the price of the car then they took off the rebate,then they said the payments also included taxes. It seems that I should pay taxes after the rebate is taken off the orignal price and not the price I'm not paying. My question is am I being over taxed? I live in Michigan. Thank you for any help and advice. I hope you can under stand what Im trying to explain. Randy

Answer
Randy,

Thanks for your question.  This is a very common question for people that are buying a vehicle.  

Think of a rebate as down payment.  It is money that is reducing the amount that you finance on the vehicle, not reducing the sales price.  Most dealers advertise it as reducing the sales price, and they are right as well.  In almost every state in the nation, you pay taxes on the SALES PRICE of the vehicle.  You do not get a tax credit for the rebate that the manufacture gives you.  That is seen as money down in the states eyes.  You get taxed on what you buy the vehicle for, or that the dealer is selling you the vehicle for.  Also, just as a reassurance for you.  If the dealer did charge to much tax, which appears that they did not, but if they did, they are required by law to refund you the difference.  Dealerships get audited by the Department of Transportation in each state at least once a year in most cases, and that is one thing the DoT looks for is how much tax they charge each customer.  They have 30 days from the date of the transaction to refund you that money, or they are breaking the law and can be fined up to $5000 per occurrence.  I tell you this so that you understand that dealerships my try a lot of "jicky" things from time to time, but most of them do not mess with the state.  They don't want the state or government on them at all, so they do things by the books.

It sounds like you did not get over taxed, but it is a good question, and you should be proud of yourself for looking at the paperwork and asking those things.  Most people never look at their paperwork, and then get mad at the dealership 2 years later when they finally realize it.  

Enjoy your new Jeep Liberty.

Thanks -

Jeremy Beck