In Virginia, leasing a vehicle means making payments for the use of a vehicle for 12 months or more. Anything less than 12 months is considered "renting."
If you're considering leasing a vehicle in Virginia, here's a helpful overview.
Leasing Terminology
Lessee
The person or entity offering compensation in exchange for the use of a vehicle for 12 months or more.
Lessor (owner)
The person or entity offering the use of a vehicle for 12 months or more in exchange for compensation. In Virginia, lessors do not need to be licensed, and 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 (SUT) exemption.
Power of Attorney (POA)
A legal document used to name another person or entity to handle vehicle-related paperwork (e.g., titling, registration, etc.) for a leased vehicle.
Residual Value
The value of a leased vehicle at the end of the term of the lease. The residual value is normally specified in the lease contract.
Selling Dealer
A 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
Unless you buy the vehicle at the end of your leasing agreement, you do NOT need to title your leased vehicle.
The leased vehicle will be titled in the name of the lessor, who is responsible for paying all associated fees at the time of titling, such as the $15 title fee and the SUT.
If the lessee's name is not on the title record, they may still handle the titling transaction by using a power of attorney (POA) from the lessor.
Note:
Sometimes, the leasing agreement may require the lessee to make these payments. Read your agreement carefully and contact the lessor with any questions.
Register a Leased Vehicle
If the lessee's name is not on the title record, they may still handle vehicle registration transactions by using a power of attorney (POA) from the lessor.
Buy Out Your Vehicle Lease
When a lease ends, the lessee can either return the leased vehicle, or buy it from the lessor.
If you return the vehicle, the lessor is responsible for any vehicle-related actions moving forward.
If you buy the vehicle, you must re-title the vehicle in your name and pay Motor Vehicle Sales and Use Tax (SUT), which is based on the residual value paid by the lessee to the lessor.
SUT Exemption
If you already paid the SUT when you leased the vehicle, you may be exempt from paying it again, if:
- You present proof you paid the SUT in Virginia
- The title includes your name on the lease and not a commercial entity
- You purchased the vehicle directly from the lessor, or from the selling dealer if one existed
Note:
The SUT exemption only applies when the lessor transfers ownership to the lessee as a purchase at the end of the lease agreement.
Personal Property Tax Relief
Vehicles leased to a person (instead of a business) and primarily used for non-business purposes may qualify for Personal Property Tax Relief. See Code of Virginia for what qualifies as non-business purposes.
If you have not received tax relief on a leased vehicle that you believe qualifies, contact your lessor and ask them to double-check they've reported your vehicle to DMV.
If your lessor has reported your vehicle and you have not received tax relief, contact your local Commissioner of the Revenue or Director of Finance.
Lessors are required to report potentially qualifying leased vehicles to DMV. Commissioners of the Revenue use this information to identify vehicles qualifying for tax relief.
See Personal Property Tax Relief for more information.