Some Fairfax County residents will see an increase in their car tax bills, with the pandemic being cited as the reason for the rise.
Fairfax County announced via their website that about 12 percent of county residents will see a significant increase in their car tax bills when compared to last year. According to county tax officials, the average increase for those residents who will experience the increase will be $25 for cars valued at $20,000 or less.
The reason cited for this rise in the car tax bills was attributed to the low supply and high demand for used and new cars pushing prices to record levels. According to the release, automakers were hit with a global shortage of computer chips due to the pandemic which hampered the ability of those automakers to build new cars. In response, many car buyers turned to purchasing used vehicles which because of their scarceness drove the prices higher.
Fairfax County also attributed low interest rates and stimulus payments helping with car purchases and fueling the climbing price tags for used vehicles. This is counter to the norm where the value of used vehicles decreases every year that the vehicle ages.
Many automakers such as General Motors, Fiat Chrysler, and Volkswagen were forced to either cut staff or completely shut down their auto plants due to the dangers brought on by the coronavirus pandemic. Sales in March and April 2020 fell by more than one-third as much of the country went into lockdown, according to a March 2020 article from NBC News.
In that same article, American multinational investment bank Stanley Morgan anticipated that U.S. demand for cars would drop to 15.5 million from 17.1 million vehicles sold in 2019.
Automakers were on track to surpass Stanley Morgan’s assessment but have run into the problem of lacking the necessary supply of microchips which are essential components for the electronic systems in modern cars. The production of microchips had been scaled back during the pandemic in favor of other consumer electronics which those stuck at home through the pandemic were more likely to purchase while stuck at home.
However, once restrictions were lifted and the plants were able to resume production the impact from the lack of microchips has put some companies in a very precarious position. In an August 2020 article on the website Techxplore, Jaguar Land Rover warned that the lack of microchips could cut it’s third-quarter output by half. Volkswagen also commented that they could also see a drop in production during the third-quarter by roughly 450,000 vehicles.
This year will also see the penalties for late personal property taxes and real estate tax payments return to normal rates after they had been reduced by the County Board of Supervisors last year. The board has cut the penalty in half from 10 percent to 5 percent for late payment on those taxes as well as eliminating the additional 15 percent penalty for car taxes that are more than 30 days overdue. The Board passed these measures as a temporary reprieve and noted that they would return the following year when they announced the change back in 2020.
Fairfax County bases car taxes on a vehicle’s value listed in guides such as J.D. Power’s Used Car Guide or The National Automobile Dealers Association Used Car Guide. The fair market value of a used car is determined by the “Clean Trade-In Value” listed as of January 1 of the tax year. The current tax rate of motor vehicles in Fairfax County is $4.57 per $100 of assessed value. According to a video posted by the county on YouTube the tax amount can be determined by dividing the value of the vehicle by $100 and multiplying it by the tax rate. However, car owners can file an appeal on the taxes if they believe that their vehicle has been over-assessed based on body damage, rusting, or mileage on the car.
Fairfax County has been notifying taxpayers of this change and since personal property tax bills are currently being mailed out and are due by October 5. Those who would dispute the assessment of their vehicle would still have to pay on time.
Fairfax County has offered online bill pay as well as physical drop-offs in red boxes at the Government Center and select library branches which the county plans to announce September 15. For more information contact the Fairfax County Department of Tax Administration on their website or call 703-222-8234 TTY 711.