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Legislation Impacting Motor Vehicle Fees & Taxes

Illinois Vehicle Title Fees Increase, Annual Registration Fees and Sales Tax on Trade-Ins Set to Increase January 1, 2020.

By: Ashley Niebur Sharp, VP State Advocacy & Legislative Counsel

As part of the state budget passed by the Illinois General Assembly during the spring legislative session, increases in titling and registration fees for motor vehicles in the State were approved, along with a $10,000 limitation on trade-in sales tax credits. The revenue generated by these changes is intended to fund statewide transportation and road improvement projects. Credit unions engaged in auto lending may experience effects in lending trends as the result of new and additional costs associated with vehicle ownership in Illinois.

On July 1, 2019 various title fee increases went into effect. Fees for certificates of title on standard motor vehicles increased from $95 to $150, and certificates of title for motor homes and campers increased from $95 to $250.

Beginning on January 1, 2020, annual vehicle registration fees will increase incrementally based upon the class of vehicle, with standard automobile fees increasing from $101 to $151. Annual registration fees for trailers and farm trucks will also see an increase of $100 from the current fees, based upon vehicle class.

Details on the new fee structure for title and registration fees may be viewed on the Secretary of State’s website.

Beginning on January 1, 2020, Illinois will limit the sales tax credit on trade-in-vehicles to $10,000. This limitation will affect consumers who purchase new vehicles with an existing trade-in valued at over $10,000. Today, consumers receive a dollar for dollar sales tax credit for the value of a trade-in during a new vehicle sales transaction at a dealership. This model is beneficial to consumers with high dollar trades, based upon the foregoing example:

New Car Value: $50,000
Existing Trade-In Value: $30,000
Amount Taxed Prior to January 1: $20,000
Amount Taxed After January 1: $40,000

With the cost of new vehicles consistently trending upward, and vehicles such as SUVs retaining value year after year, the $10,000 value limitation will have a notable impact on consumers. In many circumstances, the new tax model will equate to a significant increase in cost associated with trading in vehicles, particularly for those consumers who frequently trade in their existing vehicle for a newer model. Combined with the fee escalation for titles and annual registration; these changes will result in overall increased costs of vehicle ownership, which may deter consumers from trading in vehicles as frequently as they once did. While the effect of these changes remains to be seen after implementation of the new law, credit unions engaged in automobile lending may see a downward trend in new loan activity, if consumers do, in fact, change their practices.

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