Alright, got an out-of-state deal lined up, except the dealer and I are in disagreement with how taxes are handled.
I am in Cook County, I plan on registering the car in Lincolnwood since my business address is there, even though I live in Chicago.
They are showing me guidance from BMW that says that there is a 7.25% upfront tax on the total of the lease payment in IL. In my case this is adding nearly $2500 in upfront charges, or about $100 a month.
It was my understanding there was about 9% tax on the monthly payment, and if lived in Chicago city an additional 9% use tax. This is the first time I’ve heard that in IL the entire tax payment is up front. Anyone who leases in the Chicago area, is this the case?
That’s pre-2015 leasing tax laws in Illinois. Maybe they forgot to take out that part in the documents? Being an out of state dealer they may not be aware that the tax laws changed in Illinois to be levied on the monthly payment now as opposed to the total of the lease payments. Just my guess. Maybe show them some documentation detailing the tax law on leases in Illinois.
This entire time I believed the sales tax on vehicles to be 8.25 ( I am located in Morton Grove, Crook county), but is my tax rate in fact 7.25? I could not find too much on the internet regarding this.
I can look at my lease papers when I get home later, but I registered my car in lake county bc that’s where my in-laws live to get around the additional use tax. I paid roughly $1600 at signing.
I am unclear on how cars can be registered at a place of residence outside of where your ID or Utility Bill/Lease Agreement/Mortgage PPW etc… says you live.
Note that for some reason BMWFS provides guidance to the dealers to charge a tax on the full sale price even though it’s really 8% on the lease payment.
For my x2 deal I paid full sales price tax up front, then after the car was registered BMWFS applied excess to the payments.
In Chicago the tax due would be 8.5% on the total of lease payments, any customer rebates and down payments. This amount can be paid up front or rolled into the monthly cost, but each bank can do it differently. Chicago also adds an 9% use tax onto the lease payment amounts.
For the Cook County suburbs of Chicago, you have generally 7.25% on the total lease payments, any customer rebates and down payments. You do not have any additional amounts on the lease payments.
Prior to 2015, Illinois treated leases as sales and taxed the entire negotiated purchase price minus any trade in at the 7.25% or 8.5% rate depending on where you lived.
The sheet by BMW is factually correct at the top part, but then screws up the part under Tax Rate that ends in “tax upfront on the selling price.” That may be where the confusion lies as it is not taxed on the selling price, but on the total amount of lease payments plus customer rebates and down payments.
