If you are looking to lease a new car your timing couldn’t be better. No this isn’t Crazy Chuck’s Car lot, there are new tax laws to benefit car shoppers looking for a new lease here in the state of Illinois.
So under last year’s tax law, you paid the tax based on the price of the vehicle, so take for instance at my local Chevrolet dealer the MSRP (Manufacturers suggested retail price), on a 2015 Chevrolet Traverse LT SUV (pictured), is $ 33,620. You paid your local tax based on that which in Cook County is 8.25% (add another lease tax of 8% if you live the city of Chicago), so that sizable.
However now in 2015 you only pay tax on the amount of the lease and the current lease deal from my local Chevrolet dealer on that same Traverse is $279 a month for 36 months. That’s only $ 10,044, a lot less right?
Remember a lease is basically a long term rental of the car and there is usually a mileage limit on the car and you can make no modifications on the car. In the case of the lease agreement I’m stating from my local Chevrolet dealer you have to go through their bank (General Motors preferred lender is Ally bank), its not like purchasing a vehicle where you can have your own financing or have competing loans via the dealer’s finance office. Its basically their bank, their deal and yes essentially, their car.
But if you like a new car every few years, don’t mind a constant car payment and don’t put on a lot of miles its financially smart because a car is a declining asset. Its common (unless you put a lot of money down), to have a car not worth as much as its loan.
Okay got all of that?
If you are like me and like cars, plan to mile it up, keep it a long time and maybe make a few changes, then a lease is not for you. There are penalties for over mileage (serious too, like a penny a mile), and for alterations to the vehicle.
It used to be a lot of used cars were leases and thus you had number of good cars, well maintained and perfect for resale. Most leased cars are larger cars and SUV’s and not base models, they have nice options, these aren’t rental cars.
But with the decline in the economy and also in car sales, the number of leases went down too. Here in Illinois leases made up less than 15% of all new car transactions, now of course that was when we had the second highest lease tax in the country (Texas is first), but now that is not the case.
Add in the factor that gas is at its cheapest in at least 10 years (its $ 1.88 in Lemont as of Thursday night), and that there are a slew of new pickup trucks and SUV models out this year.
Don’t forget that the Chicago Auto Show is around the corner too (February 14th-22nd), so its a buyers market. As of last year the average vehicle on the street is 11 years old, so manufactures know people will shop and there are deals to be had. Along with the tax change in leases, take a look at purchase options for your next car.
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Filed under: Cars