Proposal Would Lower Price Of Car Leasing

Nov 4, 2013

The price of leasing a car in Illinois could be lowered under a proposal, supported by auto dealers in Illinois, now before the Illinois General Assembly.

Credit flickr / quinn.anya

If you were to lease a car today, chances are you'd be charged for tax on the full value of the vehicle, just like if you were buying it.

But the leasing company actually pays taxes, and -- due to how the system is set up in Illinois -- they probably pay only a fraction of what they've collected to the state.

Proposed legislation, backed by auto dealers, would have customers pay tax only on their monthly payments -- not the full cost of the car.

Joe McMahon, a lobbyist for the Illinois Automobile Dealers Association, says the current system has kept leasing from taking off in Illinois like it has elsewhere.

"In other states throughout the country, it's close to 25 percent of all transactions," he said. "In Illinois, we're only at 10 percent."

That's why the dealers are supporting the change. The dealers say lease customers are very sensitive to the bottom-line monthly price, so they expect the change to attract more business.

They say the change could lower lease payments by $60 a month for a car worth $32,000.

After long opposition and lengthy negotiations, the Illinois Department of Revenue supports the change.

Spokeswoman Sue Hofer says Illinois won't lose any tax revenue. "This way we know the person who drives that car off the lot isn't going to end up paying more sales tax to the person he or she bought it from than that person pays to the state of Illinois," she said.

Brian Mackey contributed to this report.