Phone: 630-495-2282 Fax: 630-495-2260 Map/Directions

New Illinois leasing era underway

January 2, 2015
A rare triple winner — good for consumers, good for business, good for government — debuted Jan. 1 in Illinois, when the state changed the method of taxation on leased vehicles.
Also Jan. 1, the CATA rolled out an aggressive advertising campaign to make sure consumers are aware of the change. With contributions from every manufacturer in the market together matching the CATA’s buy, the campaign is worth more than $1 million.
With tag lines of "The Lease You Can Do" and "More Car, Less Money," the campaign emphasizes the newfound benefits of leasing a new or used vehicle in Illinois. The campaign wasted no time, airing New Year’s Day spots during the Tournament of Roses Parade and the Rose Bowl football game that followed.
The television ad buys are slated to show more than 2,000 messages during the year’s first quarter, delivering nearly 125 million gross ad impressions among adults, whose target audience will see the spots an average 19 times each over the next three months.
About 93 percent of the campaign’s target group will hear radio messages an average 11 times each through March. Digital advertising also is part of the mix.
"The CATA worked years for this change in order to increase leasing activity for our dealers," said CATA Chairman Colin Wickstrom. "Now that the change is here, the association is ready to help our dealers capitalize on it."
Before the change, lessors paid use tax on the entire value of the leased vehicle, and the lessee did not pay any sales tax. Under the new law, tax on leases longer than one year is applied to each monthly payment, as it is in most other states in the country.
The result: Consumers pay less tax, dealers lease more cars, and the Illinois Revenue Department gets more money from the increased leasing activity.
The changes affect the tax base, calculation, and reporting methods for vehicle leases:
Tax due at lease origination Lessors pay tax on all amounts due under a lease at the time the lease is entered into. While not exhaustively defined, this includes down payment, acquisition fees, lease fees, monthly payments, and potentially other charges.
• Subsequent tax obligations Lessors collect tax from lessees on amounts not calculated at the time the lease is entered into, such as excess mileage and wear and tear charges. This could also include value adjustments made on net leases, which make up the difference between the actual value of the vehicle at the end of the lease and the stated residual value at lease inception. Under the previous rules, no sales tax was paid on those charges.
• Advance trade credits and third-party trade-ins Trade-ins from the lessor (advanced trade-in credits) or from the lessee (under a third-party trade-in credit) are eliminated and do not reduce the tax base of the vehicle. 
• Lease-end credit Previously, lessors who paid tax on previously leased property (including vehicles) were entitled to a credit for the amount of sales tax paid when the vehicle later is sold to an Illinois customer. Because lessors no longer will pay tax on the entire vehicle cost for leases, the credit will not apply to these leases.