OAKBROOK TERRACE, Ill. -

In what the Chicago Automobile Trade Association is calling a rare triple winner — good for consumers, good for business, and good for government — the Windy City’s dealer organization highlighted four components of Illinois’ revamped state tax program associated with leased vehicles.

Before the tax law change that went into effect Jan. 1, lessors paid use tax on the entire value of the leased vehicle, and the lessee did not pay any sales tax. Under the new law, CATA explained tax on leases longer than one year is applied to each monthly payment as it is in most other states in the country.

According to association officials, the result is consumers pay less tax, dealers lease more vehicles, and the Illinois Revenue Department gets more money from the increased leasing activity.

The changes impact the tax base, calculation and reporting methods for vehicle leases in four ways:

• Tax due at lease origination: Lessors pay tax on all amounts due under a lease at the time the lease is entered into. While not exhaustively defined, this includes down payment, acquisition fees, lease fees, monthly payments, and potentially other charges.

• Subsequent tax obligations: Lessors collect tax from lessees on amounts not calculated at the time the lease is entered into, such as excess mileage and wear and tear charges. This could also include value adjustments made on net leases, which make up the difference between the actual value of the vehicle at the end of the lease and the stated residual value at lease inception. Under the previous rules, no sales tax was paid on those charges.

• Advance trade credits and third-party trade-ins: Trade-ins from the lessor (advanced trade-in credits) or from the lessee (under a third-party trade-in credit) are eliminated and do not reduce the tax base of the vehicle.

• Lease-end credit: Previously, lessors who paid tax on previously leased property (including vehicles) were entitled to a credit for the amount of sales tax paid when the vehicle later is sold to an Illinois customer. Because lessors no longer will pay tax on the entire vehicle cost for leases, the credit will not apply to these leases.

Gov. Pat Quinn signed House Bill 2317 last May that created this possible scenario for an individual who is interested in leasing a vehicle in DuPage County, a vital part of the Chicagoland market.

Prior to Jan. 1, officials calculated a DuPage County resident leasing a $27,000 vehicle for 36 months with no money down would expect to pay about $1,890 in state taxes. After Jan.1, they figured that same customer would pay just $945 in taxes — assuming the vehicle had a residual value of 50 percent. That’s a savings of $945, amounting to more than $25 per month.

The savings get even greater on 24-month leases or more expensive vehicles. For example, a DuPage County resident leasing a $60,000 vehicle for 24 months with a 65-percent residual prior to Jan. 1 would pay $4,200. After Jan.1, that same customer would pay $1,470 in taxes, saving $2,730 in taxes over two years.

“The CATA worked years for this change in order to increase leasing activity for our dealers,” CATA chairman Colin Wickstrom said. “Now that the change is here, the association is ready to help our dealers capitalize on it.”

The CATA rolled out an aggressive advertising campaign to make sure consumers are aware of the change. With contributions from every manufacturer in the market together matching the CATA’s buy, the campaign is worth more than $1 million.

With tag lines of “The Lease You Can Do” and “More Car, Less Money,” the campaign emphasizes the newfound benefits of leasing a new or used vehicle in Illinois. The campaign wasted no time, airing New Year’s Day spots during the Tournament of Roses Parade and the Rose Bowl football game that followed.

The television ad buys are slated to show more than 2,000 messages during the year’s first quarter, delivering nearly 125 million gross ad impressions among adults, whose target audience will see the spots an average 19 times each over the next three months.

About 93 percent of the campaign’s target group will hear radio messages an average 11 times each through March. Digital advertising also is part of the mix.

“The Chicago metro market has never had good lease penetration because of the way the state taxed vehicle leases,” Wickstrom said. “With this change in the tax law customers will be able to afford more car than ever — perhaps lowering their monthly payments at the same time.”

Nationally, the number of new-vehicle owners that are leasing has grown to 26 percent — a figure that has doubled over the last five years, according to data from Experian Automotive. Wickstrom pointed out Illinois has lagged well behind at just 14 percent.

Wickstrom also mentioned leasing rates in Chicago are among the lowest for any metro market in the United States. By comparison, New York metro has a lease rate of 50 percent and Cleveland, 48 percent.

CATA president Dave Sloan insisted the change in the way vehicle leases are taxed in Illinois should make leasing a much more attractive option for new-vehicle shoppers while enhancing what dealers deliver into state coffers. Sloan noted Illinois franchised dealers accounted for $28.4 billion in total retail sales in 2013, which was 15 percent of the state’s total.

“The CATA, along with the Illinois Auto Dealers Association, worked to show the Illinois Department of Revenue that changing the way the state collects tax on vehicle leases would not only be good for the consumer, but would result in more revenue for the state,” Sloan said.