Lease of a Road Vehicle by a Dealer

The GST/HST and 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 new vehicle. In such cases, the GST/HST 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/HST and QST must also be collected on any cash payment made by the lessee at the end of the lease contract.

Registrant who leases road vehicles

The lessor must collect the QST at the time a road vehicle is leased (short- or long-term lease). In addition, in the case of a long-term lease, the lessor must collect 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
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

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