Sales tax “credit”? (archive)

I live in Washington State. I am planning to lease a new 2001 Z3 Roadster 3.0i (no flames please on the idea of leasing – it makes economic sense for how I drive and care for my cars). My question is based on the fact that I have two dealers telling me very different stories about my current leased car, a 1998 Z3 Roadster 2.8. This car has a residual cost of $27,611.50. The leased price included both the Premium and Sport packages, and heated sport seats. I also paid to have a few additional options added after the lease was established: a BMW Remote Keyless Entry Security and Alarm System, the Z3 Trunk Storage system, BMW Z3 wind screen, BMW chrome exhaust tips, BMW locking lug nuts, and the full (exterior and interior) Perma-Plate option from the dealership. The car, a Jet Black beauty with a gorgeous black and tan leather interior, is in immaculate condition. I unfortunately leased it for 30 months at 12,000 miles per year, but here at month 25, I only have 17,000 miles on the vehicle. At this rate, it’ll likely have just under 20K on it when the lease ends. I have heard arguments, both pro and con, regarding whether or not I will have equity in this current car.

Dealer #1 tells me that despite the under-mileage, I’ll never get any money out of it due to the fact that I will have to pay WA State sales tax (8.6%) on the residual cost if I sell it, which will eliminate most of the equity value. He asks if it is worth the hassle to try to sell a car on my own for what might be only a few hundred dollars profit? Good point. However, Dealer #2 tells me that if I traded in the car to him (in other words, he’d BUY it from BMW NA), a sales tax credit would eliminate the sales tax due, and thus I could get around $2,000 for the trade-in (which is more than I’d get for trying to sell it on my own and cover the sales tax amount as well). However, dealer #1 says there is no sales tax credit on trade-ins of leased vehicles. Dealer #2 sounds like the guy to go with, but he is much younger than Dealer #1, and I don’t want to be sucked in by either a bait-n-switch tactic or by a potential ignorance of the way things work with lease returns. However, Dealer #2 sounds like he is earnestly telling me the truth (he has been very candid about other issues which makes me believe he is telling me at least what he believes to be the truth). I just don’t know whose story to believe. What you all think? Thanks for any feedback!

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