By Mike Wood

Whether you like it or not, someone always takes a cut off the top. When you order fries, your partner eats a few. When you earn income, the government takes its share. When you buy a new ride, you pay sales tax, which can feel especially painful considering the average vehicle price. Taxes are a given, but why pay more than you should? We can’t fix your fry problem (you’re on your own with that one), but we can help you save thousands in car tax by buying and selling your vehicle the smart way.

Read on to learn about a secret car tax benefit that will save you big on your vehicle trade-in.

How Car Sales Are Taxed in Canada

Before we explain this special car tax benefit, first let’s break down how vehicle sales are taxed in Canada. Let’s say you live in Vancouver, and you sell your car on Craigslist and buy a new one at a dealership:

• If you buy a passenger vehicle that’s worth less than $55,000—a Mitsubishi Outlander PHEV valued at $49,995, for example—you’ll pay 5 percent GST and 7 percent PST on your purchase. That works out to roughly $6,000 (12 percent in car tax) on your new ride.
• If you take home a passenger vehicle worth between $56,000 and $56,999—a 2020 BMW 4 Series, for example—you’ll pay 8 percent in PST plus 5 percent GST (roughly $7,400 in tax).
• If you buy a vehicle worth between $57,000 and $124,999, you’ll pay 10 percent PST plus 5 percent GST. For a $109,995 Mercedes-Benz S-Class, that adds up to $16,500 in sales tax.
• If you splurge on a luxury vehicle worth $150,000 or more, you’ll pay a staggering 26 percent in total sales tax.
• If you live in Alberta, you won’t pay PST on your new vehicle, a perk known as “the Alberta advantage.” However, you’ll still pay 5 percent in GST. If you live in Quebec, you’ll pay 9.975% in PST for your new ride plus 5 percent GST.

No matter how you slice it, paying thousands in tax on an already steep purchase is a major drag—but not if you trade in your vehicle the smart way.

The Secret Vehicle Trade-In Tax Benefit

Now that you understand car tax, let’s talk about how to pay less of it. Let’s say you trade in your Honda CR-V for a Lexus RX at a Vancouver dealership:

• The dealership buys your Honda CR-V for $35,000 and sells you a Lexus RX 350 for $60,000.
• Instead of paying sales tax on the full value of your new Lexus (15 percent of $60,000 dollars) you only pay sales tax on the vehicle trade-in difference ($60,000 – $35,000 = $25,000).
• So, you’ll pay 15 percent sales tax on $25,000 ($3,750) vs. 15 percent of $60,000 ($9,000). That’s a total of $5,250 in savings, the price of a week-long tropical vacation for two.

How Much Will You Save?

If you sell your car privately and buy a new one from a dealership, you can’t take advantage of this car tax benefit. In this case, the dealer would charge you 15 percent sales tax on $60,000, the full value of your new Lexus, setting you back an additional $9,000 in sales tax. You can take advantage of this vehicle trade-in tax benefit through any dealership, if you trade in your current car and buy a new one at the same dealership. However, if you’re only doing business with one dealer, you’re not stepping into your full negotiating power. We’ll explain why below.

Create Competition & Boost Your Buying Power

Dealerships market themselves as a one-stop shop. You can trade in your current car, buy a new one, and drive it off the lot. But when you trade in your car and buy a new one through the same dealer, you’re only negotiating with one dealership. However, if you trade in your car through MintList, you can take advantage of our one-to-many model to expand your options and buying power. On the MintList marketplace, you can only buy and sell through heavily vetted dealers versus privately to another consumer. This eliminates risks and offers you a few big benefits.

When you trade in your vehicle through MintList you can:

That’s a Wrap

Traditionally, buying and selling a vehicle has been a frustrating, risky process. But those days are long gone. Instead of spending your day in a dealership, you can sell your ride and buy a new one from the comfort of home. Sell your current car for top dollar, choose from a wide selection of vehicles, and save big on car tax. Selling and buying a vehicle the smart way puts the buying power in the right hands—your hands.