Car leasing in Georgia has changed and is now a bit different than in most other states.
Since March 1, 2013 Georgia has a new Title Ad Valorem Tax (TAVT) that applies to all new car purchases and leases — and used car purchases.
The tax is paid up-front (or rolled into financing) at the rate of 7.0% of the fair market value of the vehicle, as determined by the Georgia Department of Revenue — or the vehicle selling price, whichever is greater.
UPDATE: Georgia has chosen to freeze the TAVT tax rate at 7% for 2018-2019.
UPDATE: Georgia passed a revision of its tax law in 2017 that changes the way TAVT is calculated for leased vehicles. House Bill 340 which is effective as of January 1, 2018 taxes only the sum of lease payments, not the entire value of the vehicle as before — a much more fair tax for leasing consumers in Georgia.
UPDATE: Georgia passed a revision of the TAVT tax law in 2019 that reduced the rate from 7.0% to 6.6% and will go into effect January 1, 2020.
For Georgia car leases, the new one-time TAVT means no separate sales tax on down payment, no sales tax on monthly lease payments, and no more annual ad valorem property tax, which had been the practice in the past. Of course there are still annual tag fees, which are minimal. Leasing customers will not need to have annual emissions inspections (in those counties that require it) if the lease term is 36 months or less. Such vehicles are exempt from inspections.
Here are a couple of points of interest for Georgia leasing customers:
1) When you see a car company offering a car lease deal with a specific monthly payment, that payment will increase after the TAVT tax has been added to the lease — unless the tax is paid up-front in cash.
2) If you plan to purchase your vehicle at the end of the lease, you may have to pay TAVT tax again. We suspect that this section of the rules may change, as it is currently not clearly defined and is certainly not fair.
The following document, intended as a guide for car dealers, explains the Georgia TAVT in considerable detail:
https://dor.georgia.gov/sites/dor.georgia.gov/files/related_files/document/MVD/Bulletin/MV_%20Dealer_Tax_Guide_2013_1.pdf