Buy car from dealer. How does the GST work with trade in

[Cos]

So if I trade in a vehicle and buy another vehicle at a dealer I understand I need to pay GST on SOMETHING.

The question is.... what portion do I pay GST on.

I am going to round numbers to make it easy but lets assume the following scenario:

- Trade in lien outstanding: $20,000
- Trade in value: $19,000
- Vehicle purchase price - $15,000
- Total payment to the dealership: $16,000

Now, as mentioned, what do I pay GST on? Just the 15 grand? Is it the 16,000 (I dont think so since I already paid the GST). I am trying to figure out the best way to negotiate this around and also figure out what my costs (and what I am comfortable) paying.

thanks

Cos

[Darell_n]

I paid GST on the difference only, a few weeks ago.

[Cos]

Originally posted by Darell_n
I paid GST on the difference only, a few weeks ago.

Right so because I am over value what is considered the difference in this case..... nothing?

[JordanAndrew]

yup, you don't pay gst.

[Darell_n]

Originally posted by Cos


Right so because I am over value what is considered the difference in this case..... nothing?

Sorry, I didn't read all the details. I would think you pay no GST in your case, but I'm not a financing expert by any means.

[Cos]

Fucking sweet, thanks guys! That is even better!

[tictactoe2004]

You will pay GST on the 15k.

If you owned the trade in outright you'd only pay GST on the difference. You will not have to pay any additional GST on the $1,000 you owe on the trade in.

[ianmcc]

Copy and paste from www.cra.gc.ca...
A different rule applies for used goods you accept as a trade-in from a person who is not required to charge GST/HST (usually a person who is not required to register for GST/HST). A person may also trade-in a leasehold interest in used goods.

In this case, you generally charge GST/HST on the net amount of the sale or lease, that is, the price of the goods you sell or lease minus the amount you allow for the trade-in. This approach is consistent with the treatment of trade-ins under most provincial sales taxes. For more information on trade-ins, see GST/HST Technical Information Bulletin B-084, Treatment of Used Goods.

In the following example we are using the GST rate of 5%.

Example
John only used his car for personal use. He goes to a registered car dealer in Manitoba to trade in his used car for a new one. The selling price of the new car is $25,000, and the dealer allows $10,000 for his used car. The dealer charges GST on $15,000.
Selling price of new car $25,000
Less trade-in of used car − $10,000
Subtotal $15,000
GST ($15,000 × 5%) + $750
John pays $15,750

[Cos]

Originally posted by tictactoe2004
You will pay GST on the 15k.

If you owned the trade in outright you'd only pay GST on the difference. You will not have to pay any additional GST on the $1,000 you owe on the trade in.

Hmmmm damn. It is only about $900.00 but that sucks.


Originally posted by ianmcc
Copy and paste from www.cra.gc.ca...
A different rule applies for used goods you accept as a trade-in from a person who is not required to charge GST/HST (usually a person who is not required to register for GST/HST). A person may also trade-in a leasehold interest in used goods.

In this case, you generally charge GST/HST on the net amount of the sale or lease, that is, the price of the goods you sell or lease minus the amount you allow for the trade-in. This approach is consistent with the treatment of trade-ins under most provincial sales taxes. For more information on trade-ins, see GST/HST Technical Information Bulletin B-084, Treatment of Used Goods.

In the following example we are using the GST rate of 5%.

Example
John only used his car for personal use. He goes to a registered car dealer in Manitoba to trade in his used car for a new one. The selling price of the new car is $25,000, and the dealer allows $10,000 for his used car. The dealer charges GST on $15,000.
Selling price of new car $25,000
Less trade-in of used car − $10,000
Subtotal $15,000
GST ($15,000 × 5%) + $750
John pays $15,750


Yeah I found that right off the bat, the problem is when the trade in value of the car is MORE than the cost of my new car.... what is the situation.

[Tik-Tok]

Originally posted by tictactoe2004
You will pay GST on the 15k.

If you owned the trade in outright you'd only pay GST on the difference. You will not have to pay any additional GST on the $1,000 you owe on the trade in.

Maybe not?

When you get a car loan, the GST is part of the loan, unlike leasing where you pay GST monthly.

[Unknown303]

So what are you trading in/buying??

[Cos]

Originally posted by Tik-Tok


Maybe not?

When you get a car loan, the GST is part of the loan, unlike leasing where you pay GST monthly.

See that makes the most sense to me. Since I already paid GST on my truck which for the purpose of this vehicle I overpaid and would then cover this little car.



Originally posted by Unknown303
So what are you trading in/buying??

Trading in the truck and buying something like the car you and I drove ;) It all started when I took my brother out to look for his first car and he asked me to drive a GTI for him. Sigh..... I love hot little hatchbacks

[Unknown303]

It will be tricky getting that back into the forest...

[jdmXSI]

You pay no tax at all as long as your ar is financed. You get taxed on the net difference.
ie:
New car: $20000
Trade: -$15000
Difference $5000 + GST.

Since yours is the opposite way and it's a negative value, there is no tax even wig the lein because you have already paid tax on that sum of money. Make sense?

What kin of car are you getting?

[Cos]

Originally posted by jdmXSI
You pay no tax at all as long as your ar is financed. You get taxed on the net difference.
ie:
New car: $20000
Trade: -$15000
Difference $5000 + GST.

Since yours is the opposite way and it's a negative value, there is no tax even wig the lein because you have already paid tax on that sum of money. Make sense?

What kin of car are you getting?

Yeah thanks that makes the most sense to me.

I dont really want to say till it gets nailed down a but more. Going for a second test drive with the wife this morning. Beyond is harsh if something falls through. Lol

[ercchry]

will leave you lots of left over for the future maintenance costs of the new car :rofl:

[Cos]

Originally posted by Unknown303
It will be tricky getting that back into the forest...

Dont worry I have a plan for that. Just have to sell the wife on an old T100 and then fix it up like the Back To The Future Toyota.... :drool: I have wanted one of those since I saw it.


Originally posted by ercchry
will leave you lots of left over for the future maintenance costs of the new car :rofl:

Yeah I have never owned a turbo anything so I am excited for it.

[Aleks]

Looking at the Airdrie Honda used inventory it could only be 2 cars with turbo/hatch in that price range :D

[ercchry]

i hope its at least the second gen! heard those are slightly more reliable

[jonnycat]

jdmXSI is correct. As you have a finance contract, the gst is already calculated into the loan amount and considered as paid. So when you trade a financed vehicle in, you get a GST Credit, and only pay GST on the difference.

The way the bill of sale will be broken down will be;

$16,000 sale price (inflated $1K so $1k can be added to trade in amount to zero out lien on trade in.

($20,000) trade in value
($4000) difference
$0 GST
$20,000 lien

$16,000 total to finance or pay cash