Do you pay sales tax when you buy out your lease?

In most states, yes. Buying your leased car — whether at the end of the lease or early — counts as buying a car, and buying a car is normally taxed. So you'll usually pay sales tax on the price to buy it, on top of whatever tax you already paid along with your monthly payments. A few states handle it differently, so the honest answer is "usually, but check your state" — your state's DMV or a tax pro can tell you the exact rule where you live.

It feels that way, but they're two different taxes on two different things. The tax on your monthly payment covered *using* the car for the lease — you were only taxed on the part you used. The tax at buyout covers *owning* it from here on. So you're not being taxed twice on the same amount: the monthly tax was on the lease, and the buyout tax is on the purchase price to keep the car. It's the same as anyone buying a used car pays tax when they buy it.

It's based on the price to buy the car — the buyout figure in your lease — not the car's original sticker price. That's good news: because the buyout is lower than what the car cost new, the tax is smaller than the tax you'd have paid buying that same car brand new. Your state sets the rate, so to get a real number, take the buyout price and apply your state's used-car sales tax rate. If you trade something in at the same time, some states let that lower the amount you're taxed on.

It should be part of the math, yes. The tax is a real cost that makes buying your car cost more than the buyout price alone — so add it in before you decide. Buying to keep makes sense when the car is comfortably worth more than the buyout price plus that tax and any fees. If it's close, the tax can eat the gap, and returning the car keeps your cash free instead of tied up in a car you'd then have to resell. Run the buyout price, the sales tax, and any fees against what the car really sells for used, and let the numbers decide.