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Higher personal property taxes in city due to rising assessments, not tax rate

Charlottesville residents may be seeing higher personal property tax bills charged for their vehicles, but it’s not due to a rise in the city’s tax rate but the rising value of used cars due to supply chain issues, officials said.

According to AutoBlog and several organizations that set wholesale and retail values for used cars, the average cost of a used vehicle was 30.4% higher in March 2022 compared to March 2021. The average used car between one and five years old was valued at $34,429.

The same vehicle’s value in March 2022 compared to the previous March rose more than $8,000.

“We’ve got a situation where new and used vehicles are hard to find and at the same time, demand for new and used vehicles is still very, very high,” said Todd Divers, Commissioner of Revenue for the city. “Basic economics would tell you that when the supply is low and the demand is high, the price goes up and so we’ve got a situation for the first time that I’m aware of where used vehicles are going up in value considerably,”

While vehicles typically depreciate in value the second someone drives it off the lot, supply chain issues as a result of the COVID-19 pandemic have changed that.

According to the organizations that value used cars for resale, the cars with the greatest value gains are hybrids, electrics, subcompacts and hatchbacks. Hyundai Sonata hybrids rose 64% in value over last year for a nearly $10,000 increase in value. Values of hybrids in general rose more than 40% and electrics more than 36%.

According to a study of prices by online publication, the vehicles with the largest price increases are mainly economy and fuel-efficient cars, while the vehicles with the smallest price changes are luxury SUVs and sports cars.

The Kia Rio, Chevrolet Spark, Kia Forte, the Kia Soul and the Mitsubishi Mirage, all among the lowest-priced new vehicles, saw their used values rise 40% or more.

A used Tesla S rose more than $22,000 and a Mercedes-Benz G-class rose more than $75,000.

“The big issue is right now, car manufacturers cannot get the parts that they need to make cars, but consumers still want to buy cars,” Divers said. “The values of most vehicles are going up. The ones that have been purchased in the last five or 10 years have actually increased in value. When someone pays the tax on that vehicle at the same tax rate, they’re going to pay more.”

State law directs that cars and other ‘tangible personal property,’ such as trailers, motorcycles and mobile homes, “shall be valued by means of a recognized pricing guide” such as the National Automobile Dealers Association price guide.

Although the law allows commissioners of revenue to judge each vehicle on its mileage and condition as set out in the guide, it also allows them to use “the base value specified in such guide which may be either average retail, wholesale, or loan value, so long as uniformly applied within classifications of property.”

Most local governments, including Charlottesville, use the latter method.

The increased values have created a stir among taxpayers on social media.

“My 3-year-old car has been assessed for more than it cost when I drove it off the lot, which is preposterous,” one Charlottesville resident wrote in a letter to the city, which she posted on Next Door.

“I have no doubt that I could not get this price for my used car based on mileage and dents, etc. and thus find the assessment quite unfair,” she wrote. “To use the pandemic and its economic consequences as a way to raise taxes is a practice I find to be truly dishonest and I am very disappointed in your collective decision.”

Divers said most localities are seeing an average rise in assessments at about 25%.

“We don’t have any control over the vehicle evaluations. We use a vehicle evaluation service that is the same as every other locality in the state. And we cannot go against that,” Divers said.

Unlike Albemarle County, which lowered the personal property tax rate due to rising values of used vehicles, Charlottesville City Council opted to keep its tax rate the same. The city charges $4.20 for every $100 of a vehicle’s value.

Mayor Lloyd Snook said he supported keeping the tax rate the same for consistency. While assessments are up this year, they could go back down in the future, he said.

“I think we ought to set a tax rate and stick by it year after year and live within the means of what we’re living with,” Snook said. “For me, it was as much a matter of orderly governance as anything else.”

Divers advised City Council during the budget process to lower the tax rate to compensate for the rising evaluations, but said he understands why they made the decision not to.

“There were a lot of competing interests coming at City Council through the budget cycle, asking for money. And quite frankly, during the budget cycle, there weren’t a lot of people coming and saying, ‘Hey, do something about these vehicle evaluations,’” Divers said.

“Taxpayers didn’t pay attention. Nobody paid attention. Now that the bills are going up, everybody’s paying attention.”

Divers said experts are saying it could take a few years for the market to return to normal and for prices to gradually correct themselves.


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