Due to a new broadening of the sales tax, Illinois residents won’t get as much back in value when they trade in their cars for new ones.
Beginning in 2020, a new law signed by Gov. J.B. Pritzker will apply Illinois’ sales tax to any traded-in vehicle’s worth over $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.
Pete Sander, president of the Illinois Automobile Dealers Association, said it could mean Illinois residents put off getting a new car or won't be able to afford as much car as before.
“There’s no question that it could have a large impact on the industry,” he said, adding that a tax on the trade-in value of a car amounts to taxing the vehicle twice because it was taxed once at the original purchase.
Some Illinoisans may look to buy a car in another state, but Sander said it’s not something they can bypass at an out-of-state dealer.
“According to the tax code, there’s a provision that the state can collect that in [the registration change] and you’d be required to pay that tax but that might happen thirty or sixty days after the sale,” he said.
The association hopes to negotiate a better deal with lawmakers in the coming veto session.
The tax, Sander predicted, will mainly affect luxury cars, but it will affect more mid-level family cars over time as inflation eventually increases the cost of vehicles.