New Illinois Leasing Law Cuts Taxes in Half

On January 1, 2015, leasing a vehicle in Illinois became quite a bit more attractive (by 50%, if you look at the numbers). The new Illinois Leasing Law reduces the amount of tax that a customer would pay while leasing a car.

Prior to 2015, a customer would pay tax on the purchase price of the car, even though a lease acts as a long-term rental. This made leasing a car unappealing. Nationally the lease rate is right around 26%, but in Illinois it has been only 14%. Chicago is even lower than that, at only 8% of all vehicle sales being leases. New York, for example, has a nearly 50% lease rate. The new law states that a customer only has to pay taxes on the down payment and subsequent monthly payments.

The new leasing law makes leasing a car in Illinois like most other states. One change that also came into effect is trade-ins no longer influence the amount of taxes on a lease vehicle. Previously, a lease would reduce the value of the purchase price of the vehicle, thus reducing taxes.

Texas is the only remaining state where leasing is based upon the purchase price of the vehicle.

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