Delaware is the legal home of over 1,000,000 business entities and less than 1,000,000 people and is known as “The First State”, since it was the first to ratify the United States Constitution. It is a very business-friendly state: there’s a reason over 1 million businesses are organized there, and when it comes to vehicles it is also a generally consumer-friendly state too. But here’s some important things to know when considering buying and leasing a car in Delaware.
- While Delaware is famous (in the Mid-Atlantic region at least) for having no sales tax, there is a moderate use tax on leased vehicles, as well as a documentation fee on purchased vehicles.
- For a lease, Title 30 Chapter 43 of the Delaware code describes the taxes imposed upon lessors, which would both appear to be able to be passed along to the lessee (so we assume that they are). One tax is for 1.9914% and the other for 0.2987%, so this would sum to just under 2.3% of the lease payments, and is due on the amount of the lease payments. This does not appear to apply to cap cost reduction or any fees that are paid upfront at signing. (Again, as it reads in plain English – this is not a legal opinion nor based on any read of judicial opinions that have interpreted the Delaware code).
- There is a trade-in credit available, similar to other states, where the value of the trade-in is deducted from the taxable purchase price of the vehicle being purchased. This wouldn’t apply to the lease, because any net equity for the trade-in would be cap cost reduction – but you will lower your payments in that case, and therefore reduce this use tax as well.
- Since the “documentation fee” is what other states would collect as sales and use tax, dealers cannot use this term for a fee they charge consumers for the administrative processing. Instead a Delaware dealership will likely call the fee an “administrative fee” or “processing fee”. This fee is not capped by state law, so be sure to talk to the dealers about their fee and consider this when comparing your different offers. The average fee charged in Delaware, according to autocheatsheet.com, is $295.