Leasing a car in Illinois -does it make sense (Chicago: sales, how much)

[trueshot]

Hi

I have some questions about leasing cars and driver's licenses in Illinois. I recently moved here for a new job from New York. I will need to purchase or lease a car soon. I will only purchase or lease in Illinois and not a nearby state. I'm living in the Naperville area. I'm looking for a 2 year leased car.

1) How much more expensive is it to lease a car in Illinois compared to other states?

Some things I have read about by searching through this forum, not sure how accurate they are:
*Sales tax is on the full cost of the vehicle, no matter the lease duration.
*Additional taxes apply depending on municipality.
*Retroactive tax when the car is bought at the end of the lease duration.

I have yet to work out numbers and visit dealers, but I'm feeling like it is actually more economical in this state to purchase a new vehicle and sell it in a couple years than to lease a new vehicle for two years.

Overall, does it make more sense to buy a car in Illinois and re-sell it in 2-3 years given even modest residual value, or are lease prices still competitive here and dealers consider these additional costs in their lease offers?

Just want to assess if leasing a vehicle here is a terrible idea, or if it is not as bad as it sounds.

2) I have a NY driver's license. Can I transfer it to Illinois without taking another test?

Thank you. Any info appreciated.

[chet everett]

Illinois charges sales tax UPFRONT on leased vehicles. This adds thousands to the total price of nicer cars and folks that do not understand this end with greatly increased leased payments. If you do not have a way to get employer to pick up lease you loose big time in IL!

Illinois Sec if State handles drivers license. CyberDrive is very complete web solution. The Official Website for Illinois Secretary of State Jesse White - www.cyberdriveillinois.com

[brian571]

Originally Posted by trueshot

2) I have a NY driver's license. Can I transfer it to Illinois without taking another test?

I moved to IL from another state last summer and had to take a written test to get an IL driver license. A lot of other states will just issue you a new license and take possession of your out of state license as long as it's still valid. It wasn't a big deal though. It was 25 (common sense) questions and a sign matching portion. No sweat.

As far as the leasing thing goes, yes IL charges sales tax on the full cost of the vehicle, unlike other states that only charge sales tax on the portion of the vehicle you are actually paying for. Sales tax can vary pretty widely depending on where you live. This will tell you what it is for every city... https://www.revenue.state.il.us/app/trii

It's especially expensive to lease a vehicle in Chicago. On top of the sales tax, there's also a 8% lease transaction tax. So if you're planning on living in the city, it probably doesn't make any sense at all to lease a vehicle unless you're not paying for it.

I believe it's also true that you pay sales tax twice if you end up purchasing the vehicle out of a lease. Reason being that you don't technically own the vehicle when you lease - the leasing company does. I believe you pay tax on the residual value of the vehicle at the end of the lease. So yeah... IL is a pretty lease unfriendly state!

[madpaddy]

It's certainly a harder case to make to lease a new car in Illinois than in other states. If you want to keep the car long-term, it's crazy because you end up paying sales tax on the residual value twice.

Still, there are times when it makes sense. If the vehicle is used for business, leasing often allows you more expense write-off than the depreciation allowance you could take if you owned the vehicle. Also, manufacturers often focus their incentives allocation towards leasing because they can make a compelling statement. For example, $1000 in incentive money used to write down conventional financing might lower the payment $20 but the same $1000 spent by the manufacturer subsidizing a lease could lower the payment $40.

In areas where local sales taxes on vehicle transactions are minimal or nonexistent (i.e. outside cook county), the "all up front" sales tax issue typically ads only about 4-6% to the lease payment compared to what it would be if we used the more conventional "use tax" method. For the consumer who expects to keep the vehicle for only a relatively short period of time, leasing is often still a good idea despite that penalty. Buying with the intent to trade at 3 years is taking a risk in a fairly volatile used car market.