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Synopsis
Amends the Use Tax Act to provide
that the tax base for automobiles subject to lease agreement of one year or
more in length is 6.25% of the lease receipts, rather than the entire
selling price of the vehicle.
Eliminates the use of customer and dealer trade-in credits in lease
transactions.
Background
Under current Illinois tax laws,
there is a difference in the tax treatment of short-term leases, (defined
as one year or less), and long-term leases, (defined as over
one-year).
In 2014, for short-term leases, tax
obligation is based on monthly receipts.
For long-term leases, tax is paid at the inception of the entire
lease on the selling price of the vehicle plus related charges. Prior to 2015, a consumer pays the same
amount of tax to lease a vehicle for 2 or 3 years as he or she would pay to
buy the same vehicle.
The changes made which take effect
in 2015 now will charge the consumer on the monthly tax payment . The monthly payment tax requires that
consumers only pay tax on the part of the vehicle that he or she actually
uses.
Under the Illinois law prior to
2015, if a consumer decided to purchase the vehicle at the end of the
lease, the consumer would pay tax again on what is called the 'residual
value' of the lease, (the value of the vehicle at the end of the lease),
even though the consumer has already paid tax on the amount when the
vehicle was originally leased. In
other words, consumers are paying tax twice on the same vehicle. The previous tax structure on long-term
vehicle leases in Illinois was viewed at anti-consumer and unfair.
Examples
of Savings
A consumer leasing a new Volvo in
2015, in the surrounding Central Illinois area will now only pay the exact
amount of taxes for the period of the lease term. For a $32,000 new Volvo vehicle, which is leased for two years,
the monthly lease rate will decrease on average by $60 per month. See a Scherer Volvo Leasing Consultant for
further information and precise details on the New Illinois Vehicle Leasing
Laws or call 1.877.360.9931.
Contact a Scherer Volvo Cars Leasing Consultant Here.
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