What are the changes to the Illinois auto lease tax law?
Effective January 1 the Illinois Department of Revenue implemented changes to how it taxes motor vehicle leases and prospective car leasers could save big. Prior to the start of the year Illinois and Texas were the only states to tax the capitalized cost of leased vehicle. That means even though an individual was essentially renting a vehicle from a dealership, the individual was taxed on the “negotiated price” or the price he would pay if he was purchasing the vehicle. For example the individual could pay $2,800 in sales tax alone on a $35,000 vehicle at 8 percent. A use tax is also applied to leased vehicles, but isn’t affected by the new law.
With the new auto lease tax law individuals are only taxed on the down payment and monthly payment of their leased vehicle. If the down payment is $400 and the monthly payment is $200 for a 36-month lease an individual would pay $976 in total sales tax. The difference before and after the new law in this example is a savings of $1,824. Sales and use tax both vary by county so the impact of the lease tax law may be different depending on the location in the state.
The changes truly couldn’t have come at a better time for Illinois residents looking to lease a vehicle. Not only could the new leasers potentially save a substantial amount of money on a new lease with the law, there are always great incentives and rebates happening here at Continental Honda. Have questions regarding the Illinois auto lease tax law or any of the vehicles in our inventory? Don’t hesitate to give us a call or stop by today! We look forward to seeing you soon at Continental Honda.