Trade-In of a Road Vehicle Between an Individual and a Dealer
When a dealer that is registered for the GST and QST accepts a used road vehicle as a trade-in for a road vehicle sold to an individual who is not registered for the GST or QST, the credit given for the vehicle traded in reduces the amount on which the GST and QST are calculated on the sale of the vehicle.
Calculating the GST
The GST must be calculated on the difference between the sale price of the vehicle and the credit given for the trade-in vehicle.
Calculating the QST
The QST must be calculated on the difference between the credit given for the trade-in vehicle and the greater of the following amounts:
- the estimated value of the vehicle sold;
- the sale price of the vehicle.
Collecting the GST and QST
A dealer who is a GST and QST registrant that accepts a used road vehicle as total or partial payment for the road vehicle being sold to you must collect the GST and calculate or collect, as applicable, the QST payable where the following conditions apply:
- the trade-in vehicle is intended to be used or supplied as part of the dealer's business activities;
- you do not have to collect the GST or calculate or collect the QST on the trade-in vehicle;
- you are the owner of the trade-in vehicle.
In the case of a motor vehicle, the dealer must calculate the QST, but you must pay the QST to the Société de l'assurance automobile du Québec (SAAQ) when registering the vehicle. In all other cases, the dealer must collect the QST.
Regarding the retail sale of a motor vehicle, the dealer must give you a sales contract or other document clearly showing the amount of QST payable to the SAAQ, as well as other information, including:
- the sale price;
- the amount on which QST was calculated (taking the estimated value into account, if applicable);
- the amount of GST charged;
- the trade-in amount, if applicable;
- the delivery date.
Example
An individual who is not required to collect the GST or calculate or collect the QST buys a motor vehicle for $20,000 from a used car dealer. The estimated value of the vehicle is $23,500, that is, the average wholesale price minus $500 ($24,000 - $500). The vendor accepts the individual's old vehicle as a trade-in, crediting the individual $5,000.
| Calculation of the GST | Amounts | Calculation of the amount payable |
|---|---|---|
| Sale price | $20,000.00 | |
| Credit given for the trade-in vehicle | − $5,000.00 | |
| Subtotal | $15,000.00 | |
| GST ($15,000 × 5%) | + $750.00 | |
| Amount payable to the dealer | $15,750.00 | |
| Calculation of the QST | Amounts | |
| Estimated value (higher than the sale price) | $23,500.00 | |
| Credit given for the trade-in vehicle | − $5,000.00 | |
| Subtotal | $18,500.00 | |
| QST ($18,500 × 9.975%) | + $1,845.381 | |
| Total amount payable | $17,595.38 |
1. The QST is calculated by the dealer and must be paid by the purchaser to the SAAQ when the vehicle is registered.
Road vehicle equipped with new tires
If you buy a road vehicle equipped with new tires, you 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 vendor is a small supplier that is not registered for the GST; or
- the sale of the road vehicle or tires, or the lease of the road vehicle, is zero-rated under the GST system.
The QST does not apply if the sale of the road vehicle or tires, or the lease of the road vehicle, is zero-rated under the QST system.