New car tax law may kill car leases, some dealers say - CBS46 News

New car tax law may kill car leases, some dealers say

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John Johnson has a love affair with the Dodge Charger.

"Its just a phenomenal car and it's just a really good car. It's flashy, it's nice, it represents me," Johnson said. 

Johnson went to Ed Voyles Chrysler Dodge Jeep Ram in Marietta looking to lease a car.

"Leasing just gives you the ability to drive nice and new at a lower rate," Johnson said. 

That won't be the case for much longer. On March 1, Georgia's new car tax law goes to effect. It gets rid of the Ad Valorem, or so-called birthday car tax. In its place is a one-time tax based on the value of the vehicle. Consumers pay it when they buy a vehicle. But the new law has an unintended consequence.

"It could stop leasing in Georgia," said Drew Tutton, the general manager at Ed Voyles Chrysler Dodge Jeep Ram. "The idea of the benefit of the lease is that you pay lower taxes. One, you pay lesser interest, if you will, or finance charge and you would only pay taxes based on the time you used the car. Based on the new law, now you are going to pay the tax on the full dollar amount on the vehicle," said Tutton. 

Tutton said in practical terms, leasing payments will rise 6.5 percent, making them just as expensive as new car payments, but without the benefit of owning the car. Tutton said most leases are three years. If at the end of those three years the consumer wants to buy the vehicle, the new law will require the consumer to pay the vehicle tax again.

"I don't think people really understand or know about this yet. I think it will take some time and the more the word travels, the more people understand that," Tutton said.

Johnson said he wasn't aware of the law until the sales person told him. He said it changed everything.

"It makes me think about it more because I would actually lose money if I get it after March 1, so that is a big factor in my decision," Johnson said. "I have a lot to think about tonight."

A bill that would fix the problem is currently in a state Senate finance committee. It's not clear when or if it will make it out for a full Senate vote.

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