Lease of a Road Vehicle by a Dealer

The GST and QST apply to leases of road vehicles. 

Calculating the GST and QST 

The GST and QST are generally calculated on the monthly lease payments, determined on the basis of the residual value of the new vehicle leased and the amount credited for the trade-in, but disregarding any loan on the road vehicle traded in.

Where a dealer accepts a used road vehicle as a trade-in on the lease of a road vehicle, the monthly payments are determined based on the credit given for the trade-in.

The GST and QST must also be calculated on any amount paid by the leasee at the end of the contract.

Collecting the GST and QST 

The lessor must collect the GST and QST on the monthly lease payments for a road vehicle (short- or long-term contract). In addition, in the case of a long-term lease, the lessor must collect the GST and QST if the lessee exercises the purchase option provided for in the contract.


A registered dealer leases a $20,000 motor vehicle to an individual. The dealer accepts the individual's used vehicle as partial payment for the vehicle leased, giving a $5,000 credit for the trade-in. At the end of the 48-month lease period, the residual value of the leased vehicle will be $8,000. 

The monthly payments are calculated as shown below (assuming a 0% interest rate): 

Value of the new vehicle $20,000
Credit for the trade-in - $5,000
Residual value (purchase option) - $8,000
Cost to lease the vehicle $7,000
Monthly lease payment ($7,000 ÷ 48 months) $145.83
GST ($145.83 × 5%) + $7.29
QST ($145.83 × 9.975%) + $14.55
Monthly payments ($145.83 + $7.29 + $14.55) $167.67

Road vehicle equipped with new tires

A person that leases a vehicle equipped with new tires must pay the specific duty on new tires

As a rule, the GST and QST apply to the specific duty on new tires. 


The GST does not apply if:

The QST does not apply if the sale of the road vehicle or tires, or the lease of the road vehicle, is zero-rated (This link will open a new window) under the QST system. 

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