Supply issues fuel car tax increase for some Fairfax County residents

Fairfax County residents who drive used cars may get a higher vehicle tax bill this year than they were anticipating.

An unusual rise in the value of used cars will result in an average tax increase of $25 for about 12% of county residents, primarily those who own vehicles valued at $20,000 or less, the Fairfax County Department of Tax Administration (DTA) said in a news release yesterday (Tuesday).

“This COVID thing is really making an impact on everything here,” said Juan Rengel, director of the DTA’s Personal Property and Business License Division. “What’s happening with vehicles [is] we are experiencing an increase of about 5% in vehicle values of used cars. Typically, used cars depreciate in value year over year. That’s not the case this year.”

According to Fairfax County, the increase in assessments stems from a reduced supply of vehicles due to global shortages in automobile parts, particularly microchips, and an uptick in demand for used cars over newly manufactured cars from both customers and dealerships.

People holding onto their used cars instead of selling them, low turnover in fleets for rental car companies, and dealerships compensating for the shortage in new vehicles by filling out their lots with used ones are all putting pressure on the used car market, driving up prices, Rengel says.

He added that low interest rates have also been a factor, enabling more people to obtain loans to purchase cars.

Like the rest of Virginia, Fairfax County calculates a vehicle’s assessed value based not on the purchase price, but rather, on the market value of its specific year, make, and model over all the sales for that vehicle as of Jan. 1.

“Whatever the car value is as of January 1, that’s what we use,” Rengel said.

Vehicle taxes can be appealed if the owner believes their vehicle has been overassessed based on body damage, rusting, or high mileage, according to the DTA.

Fairfax County’s current vehicle tax rate is $4.57 per $100 of assessed value. Personal property tax bills will start to go out in the mail soon, with payment for existing and new vehicles registered in the county prior to July 1 due on Oct. 5.

Rengel notes that Virginia partially relieves the tax burden on owners by subsidizing a portion of the first $20,000 of assessed value for vehicles utilized for personal use. This year, the state will pay 57.5% of the tax bill, though owners are required to certify to the county annually that their vehicle remains qualified to receive the subsidy.

According to Rengel, Fairfax County projects that it will collect $496.7 million in personal property tax revenues this year, all of which will go into the county’s general fund that supports schools, public safety, human services, and other government functions.

Though it’s unusual for car values to go up over the course of a year, the ongoing uncertainty of the pandemic means vehicle taxes could increase again next year.

“If things continue the way they are, we can see prices going up again in 2022, but of course, we’re speculating for 2022 at this point,” Rengel said.

Photo via Obi Onyeador/Unsplash