Virginia Car Tax Rising: Why Your Car Will Cost More in 2021

The car shortage has created a domino effect, which ultimately weighs on Virginia’s tax bills.

ALEXANDRIA, Va. – Every year Virginians receive a bill for their personal property taxes: a one-time payment of tax on any car, truck, boat or other means of personal transportation.

Verify viewer Charlene emailed us saying she received a letter from the city of Alexandria stating that property taxes would increase due to the lack of used cars.

“I’m trying to understand how cars bought before the pandemic are affected by the shortage of used cars and the increase in property tax. Please verify if they can do that,” Charlene asked. Let’s verify.

Question

How is the tax on a car purchased before the pandemic affected by a current used car shortage? Is Car Shortage Raising Personal Property Taxes in Northern Virginia?

Source

  • Jason Fichtner, Vice President and Chief Economist of the Center for Bipartisan Policy
  • Alexandria City
  • Fairfax County

answer

Due to shortage of used cars, the value of used cars has gone up by about 10-15%. Virginia jurisdictions base their tax charges on the value of your car; So if the value goes up, so do your taxes.

what we found

Pandemic shortages have collapsed economic dominoes in many industries, including cars – the lack of a permanent computer chip has halted production of new cars around the world.

“A modern car can have anywhere from 3,000 to 6,000 computer chips. These are the chips that go into your cruise control, the power seat you have that adjusts,” explained Jason Fichtner. “Everything requires computer chips and they’re just in short supply. That’s why car manufacturers have had to stop producing new cars.”

Here comes the golden rule of American economics: supply and demand. There is such a short supply of new cars in the market that this has led to a huge jump in prices. Because of this, buyers are turning their attention to more affordable used cars. Here, we have the opposite effect: stagnant supply, but increased demand.

“Now the demand for used cars is high, and so people are paying a higher price for these cars,” Fichner said. “Over the past year, the average price of a used car has increased by about 12-and-a-half percent.”

In a typical non-pandemic-ridden year, most people would expect their car to depreciate in value, or be worth less money. However, this car supply domino effect means that some cars have appreciated in price, meaning they are priced much higher.

Most Virginia jurisdictions base their personal property tax charges on vehicle valuations calculated by groups such as Kelley Blue Book or J.D. Power. When those values ​​go up or down each year, your tax burden will increase.

On the website of the City of Alexandria, they say that about 15% of registered vehicles will see appreciation rather than depreciation. Fairfax County said about 12% of the vehicles they track this year have been appreciated.

“This is where chip shortages for new cars are affecting demand for older cars, which drives up the value of those cars, which now also goes into resale value and appraisal value, which people have to pay for. Personal property tax in the Commonwealth of Virginia,” Fichner said.

So we can verify that yes, the used car shortage is affecting the value of all cars, and in turn, Virginians who pay tax based on the value of their vehicles are likely to see a tax increase this year. can see.

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