Leases of Road Vehicles

The GST and the QST apply to leases of road vehicles. A dealer sometimes accepts a used road vehicle as a trade-in from a person to whom the dealer is planning to lease a vehicle. In such cases, 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.

The GST and QST must also be collected on any payment made by the lessee at the end of the contract.

Registrant that leases road vehicles

A dealer registered for the GST and QST must collect the GST and QST at the time a road vehicle is leased (short-term or long-term lease). In the case of a long-term lease, the dealer must also collect the taxes if the lessee exercises the purchase option provided for in the contract.


A dealer registered for the GST and QST leases a $20,000 motor vehicle to an individual. The dealer accepts the individual's used vehicle as partial consideration for the vehicle leased, granting a $5,000 credit for the trade-in. The residual value of the vehicle leased is $8,000 and the lease period is 48 months.

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
Monthly leasing 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

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