FILE - New Cars, Car Dealer, Auto Shop

A bipartisan group of Illinois lawmakers has gotten behind a proposal to repeal the state’s new car trade-in tax and replace it with a different fee structure. 

As of Jan. 1, Illinois’ sales tax applies to any trade-in vehicle worth more than $10,000. That means trading in a $30,000 car for one worth $60,000 will cost the customer an extra $1,200 in additional sales taxes. It’s estimated to bring the state $60 million annually, affecting what state officials insisted was a small portion of Illinois residents.

Legislation filed earlier last month would repeal the application of sales tax to trade-in value over $10,000. In turn, it would charge a tax based on the selling price of the car if it’s worth more than $15,000 or how many years old it is if valued at less than $15,000. It would take effect 120 days after it’s enacted.

Industry experts predicted the Jan. 1 change would have a profound effect on consumer buying habits and the change appears to have set in quickly.

“Last year, we had about 26 trade-ins by now from the first of the year that were over $10,001,” said Daniel Fontana, sales consultant at Mike Haggerty Buick GMC in Oak Lawn. “We’re only floating at 19 right now.”

Fontana sells mid-level luxury cars, often taking trade-ins that clear $10,000 in value. The new change, he said, is likely going to cost the state sales tax revenue because drivers will hang on to their cars longer instead of trading up, allowing the dealership to sell their car.

“We’ve got a lot of people that are normally on a three-to-four year trade cycle and this might push them out to five-to-seven,” he said. 

Instead of the re-sale tax revenue, Fontana said, the older, more depreciated vehicle will be sold at auction.

The new legislation is sponsored by state Sen. Antonio Muñoz, D-Chicago, and is cosponsored by Democrats and Republicans located throughout the state. It’s awaiting a hearing in the Senate Revenue Committee, which meets Wednesday.

Regional Editor

Cole Lauterbach is a regional editor for The Center Square covering Arizona, California, Oregon, and Washington. For more than a decade, Cole has produced award-winning content on both radio and television.