Leasing a Vehicle
- Leased Vehicle: A leased vehicle is any vehicle used by a person or entity (lessee) offering some form of compensation to use the vehicle and who has an agreement with the owner of the vehicle (lessor) for such use for a period of twelve months or more.
- Lessee: The person or entity offering compensation in exchange for the use of a vehicle for twelve months or more, generally under contract.
- Lessor (owner): The person or entity offering the use of a vehicle for twelve months or more in exchange for compensation. In Virginia, lessors do not need to be licensed. Also, the lessor may be known as a leasing company. A Virginia licensed vehicle dealer may be considered the vehicle lessor for purposes of the Motor Vehicle Sales and Use Tax exemption.
- Power of Attorney (POA): a legal document granted to the selling dealership which gives the dealership the authority to handle all paperwork (i.e. titling, registration, etc.) for your leased vehicle.
- Rental Vehicle: A rental vehicle is any vehicle used by an entity (renter) for a period of less than twelve months, offering some form of compensation to use the vehicle and who has an agreement with the owner of the vehicle (rentor or rental company). (§ 58.1-2401)
- Residual Value: The value of a leased vehicle at the end of the term of the lease. Generally specified in the lease contract.
- Selling Dealer: The Virginia licensed vehicle dealer who sold the vehicle to the lessor and arranged for the lease between the lessee and the lessor.
Titling Your Leased Vehicle
- The leased vehicle will be titled in the name of the lessor (owner).
- All applicable fees are due at the time of titling by the lessor, such as the $10 title fee and the Motor Vehicle Sales and Use Tax which is 3 percent of the gross price of the vehicle. NOTE: The leasing agreement may require the lessee to make these payments.
Registering Your Leased Vehicle
The vehicle can be registered in the lessor's (owner) name or the lessee's name. If the lessor permits DMV to include the lessee name and address in the registration address field on the title record at DMV, the lessee has the ability to handle all vehicle registration transactions for the leased vehicle. If not, the lessee may also do so by using a power of attorney from the lessor. By including the lessee's name in the registration address field on the title record, the lessee can transfer plates to and from the leased vehicle, order special or personalized plates, and renew the vehicle registration. The lessee will receive any refunds of registration for the leased vehicle without the need to provide a power of attorney. Otherwise, all information including registration renewals will be mailed to the lessor.
At the End of Your Lease...
- If the lessee relinquishes the leased vehicle at lease termination, the lessee has no further obligation to DMV regarding this vehicle. Any actions regarding this vehicle after relinquishment are the responsibility of the lessor.
- At lease termination, if the lessee retains the vehicle, the vehicle must be re-titled in the name of the lessee. Motor Vehicle Sales and Use Tax (MVSUT) will be assessed based on the residual value paid by the lessee to the lessor, unless the lessee is exempt (see below). Plates may be transferred if agreed to by the lessor.
- Motor Vehicle Sales and Use Tax (MVSUT) is normally collected when titling the vehicle in the lessee's name; however, if the lessee is the original person who paid Sales and Use Tax (SUT) on behalf of the lessor he may be exempt from paying it again. The lessee must present proof that the payment was made. Additionally, the vehicle must be either acquired directly from the lessor or from the selling dealer who leased the vehicle to the lessee initially. Purchases made through another dealer will disqualify the lessee from receiving the exemption from Motor Vehicle Sales and Use Tax (MVSUT). The title must include an individual named on the lease. The lease must be to a person or persons, and it shall not include any commercial entity as a lessee.
Personal Property Information
Some leased vehicles may qualify for Personal Property Tax Relief as provided in § 58.1-3523, et.seq. Vehicles leased to a person (versus a business) and used predominantly for non-business purposes may qualify for car tax relief. If you have not received car tax relief on a leased vehicle that you believe qualifies, contact your leasing company and ask them to be sure to report your vehicle to DMV. If your leasing company has reported your leased vehicle to DMV and you have not received car tax relief, contact your local Commissioner of the Revenue or Director of Finance.
Leasing companies are required to report potentially qualifying leased vehicles to the DMV. Commissioners of the Revenue, in turn, use this information to identify vehicles qualifying for tax relief. (§ 46.2-623.)