# Trade in vs selling old car privately



## digitalatlas (Jun 6, 2015)

Hi,

I read somewhere that one benefit of trading in a used vehicle is that it is applied directly to the purchase price of the new (or new pre-owned) vehicle that you're purchasing, which has some tax advantage, is that true?

Let's say you want to buy a car for $20,000, and have an old vehicle that's worth $5,000. This reduces the purchase price to $15,000 and you pay HST on $15,000....is this true?

I mean, one could potentially try to sell that $5,000 vehicle privately for let's say $7,000, which is a gain of $2,000, and more than the tax savings on $5k ($650)......but that really comes down to how much more you can get privately vs tax savings (if this is even true) vs trouble of selling privately.

Anyone with experience on this matter?

Thanks.


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## jollybear (Jun 28, 2015)

You will get the highest value for your trade-in selling it yourself if you want to go through the hassle of advertising it, providing a provincial safety inspection (depending on your province) meeting strangers, possibly getting ridiculous low-ball offers and generally spending the time to sell it. The tax advantage is correct trading it in to a dealership as you only pay tax on the difference. I know in Manitoba you can apply for a PST refund if you buy/sell a vehicle so you are basically saving the GST on the value of your trade-in


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## Mortgage u/w (Feb 6, 2014)

Indeed, if you trade in, the taxes get deducted so you benefit.

If possible, try selling private and process the transfer through the same transaction of your purchase. Dealers allow this. The benefit is the same as a trade in except you are saving taxes on a higher trade amount in which you already found a buyer for.


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## Pluto (Sep 12, 2013)

They will only give you wholesale value for your trade in. If your tradin is worth 5000 retail, I'd be surprised if a dealer would give you much over 2000, maybe less. Dealers low ball you because they take on the risk of an old car.


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## sags (May 15, 2010)

I am not comfortable having someone "test drive" the vehicle without being able to verify they have a valid license and insurance coverage.........so I trade them in.


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## jargey3000 (Jan 25, 2011)

pluto summed it up pretty good.


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## jargey3000 (Jan 25, 2011)

for sags:


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## jargey3000 (Jan 25, 2011)




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## jargey3000 (Jan 25, 2011)




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## digitalatlas (Jun 6, 2015)

The dealer will let me process a purchase along with the recent private sale of the old vehicle??? Does this apply to used cars and used car dealerships? How does it even work? If I sell the car for 7k privately, I give the dealer 7k and they will deduct the 7k from the purchase price and I save tax on the 7k? As opposed to the 4k they might offer me for trade in? What kind of paperwork would they need to see, you've done this? I find it surprising dealers (especially for used cars) would be willing to do this...

I sold my previous car privately, ran into all those scenarios described but luckily managed to sell pretty fast for a decent amount. That was over 4 years ago, then I bought another used car. I'm thinking abiut replacing the current one but dont really want to sell privately again if the net benefit is not much greater.

I guess I'd have to see what a dealer would offer and weigh against private sale. It's an 07 Acura tl and probably not worth much anymore, but at least a few thousand?

How much would you need to make you go private sale? Seems like there is no amount for sags, but how much would be worthwhile to you? 2k? 3k?


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## nathan79 (Feb 21, 2011)

7K sounds like a bargain, unless it's a beater. The asking price around here seems to be around 11K and up. On the other hand, 7K sounds about right for a trade-in.

Selling privately takes little effort to me. If I get an extra 3K it's more than worth it to me. (I'd even do it for $500).


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## twa2w (Mar 5, 2016)

Digitalatlas, how the private buyer/dealer tade in works is you find a private buyer for your car for 7,000.00. You take the car to the dealer and let them know you have a buyer. The dealer gives you trade in value of 7,000 on your purchase and sells your car to the prearranged buyer. This all takes place as one transaction to protect the dealer. The dealer may charge a small transaction fee and or provide a safety cert for a fee.


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## digitalatlas (Jun 6, 2015)

Ahhh... That makes sense, bring the private buyer to the dealer. I guess some dealers will do this and some will not. Also, I also look at dealers that only sell used, I bought my current Acura from a dealer like that.

Actually 7k was just a number I picked out of the air. I checked auto trader and I think I'd list 9k cause it's in very good condition, I do regular maintenance, but it's base model with 175km on it.

I feel like I'd do this if theres more than $1000 difference between private sale and trade in. I think that as the car gets older, this difference shrinks.

Cause it is a pain to do. I met with random people, got some really weird phone calls, took time for nice photos and such. I have a kid now and time is short. So I wouldn't do it to save less than 1k...maybe even close to 2k....maybe

Funny, when I sold my last car privately it was right around the time that guy in Hamilton got killed trying to sell his van and it was all over the news... I sent emails to a bunch if friends every time I took someone for a test drive... Lol


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## kcowan (Jul 1, 2010)

We bought our last car from a town councilman. We agreed on a price and then met with them at an ICBC Agency and gave him a cheque and did the transfer in 15 minutes.


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## jollybear (Jun 28, 2015)

Don`t count on benefiting from a franchise dealership selling your trade-in to a pre-arranged customer. For liability reasons the dealer will want to perform it`s own safety inspection, which will be charged out at franchise dealership rates for parts/labour. This could be a significant increase over your local garage if you currently have one.

No one does anything for free at a dealership, the business manager fee/administration fees for the transaction need to be absorbed by someone and it won`t be the dealership!


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## OutofBounds (Dec 7, 2016)

Just buy Toyota pickups. Dealerships seem to offer nearly what you could get by going through the hassle of selling privately. Hell, my 2005 Tundra has 150,000kms on it. I'd be listing it privately for $15,000 and I'd get that much too. Dealership offered me $13,500 on trade towards a brand new Tundra. Sucks to be them though, I love my truck too much. LOL


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## kcowan (Jul 1, 2010)

I bought a car privately and the seller processed the transaction through a dealership where his friend worked. I was able to purchase an extended warranty at the dealership.

A few months later, a sherif showed up to collect on the loan outstanding on the car. I showed him my bill of sale and he left. Then the dealership called me and I told them to go after the deadbeat who sold the car. I would have checked title if it was not done through the dealership. 

Buyer beware!


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## ian (Jun 18, 2016)

We recently bought a car privately this past June. Prior to viewing it, discussing price. etc (it was three hours away in another city) we obtained the VIN and ran the accident report and the lien data.

Seven years ago we were in the market for a low mileage, late model Honda, Acura, Toyota. Three of the vehicles we looked considered(two private, one dealer ) buying turned out to have accident reports on them. One quite serious. All three sellers claimed no accidents. When we finally did locate a car that we wanted it was at a dealership. They gave us a car proof report. By then I was so jaundiced that I went home, paid for, and ran my own report. A hard copy report is fine but I know from experience that it is just a piece of paper that can be altered in word, etc. By then I was from Missouri as it were.


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## 30seconds (Jan 11, 2014)

Selling cars online is so easy now I find. Selling motorcycles is more difficult. I dont let people "test ride" the bike with out cash in hand.

What kind of car? Mine is slowly going so maybe ill buy yours!


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## maoisgreat (Jul 27, 2017)

digitalatlas said:


> The dealer will let me process a purchase along with the recent private sale of the old vehicle??? Does this apply to used cars and used car dealerships? How does it even work? If I sell the car for 7k privately, I give the dealer 7k and they will deduct the 7k from the purchase price and I save tax on the 7k? As opposed to the 4k they might offer me for trade in? What kind of paperwork would they need to see, you've done this? I find it surprising dealers (especially for used cars) would be willing to do this...
> 
> I sold my previous car privately, ran into all those scenarios described but luckily managed to sell pretty fast for a decent amount. That was over 4 years ago, then I bought another used car. I'm thinking abiut replacing the current one but dont really want to sell privately again if the net benefit is not much greater.
> 
> ...


yes


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## kcowan (Jul 1, 2010)

Beware of drowned vehicles hitting the market by Christmas.


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## agent99 (Sep 11, 2013)

jollybear said:


> Don`t count on benefiting from a franchise dealership selling your trade-in to a pre-arranged customer. For liability reasons the dealer will want to perform it`s own safety inspection, which will be charged out at franchise dealership rates for parts/labour. This could be a significant increase over your local garage if you currently have one.
> 
> No one does anything for free at a dealership, the business manager fee/administration fees for the transaction need to be absorbed by someone and it won`t be the dealership!


Last time I bought a new car, I found a buyer for one of our existing cars. I advertised it with safety, so I obtained the safety once we agreed on price. Took the paperwork to the dealer and he processed it as a trade in. We were happy and so was buyer because dealer treated him as a customer in properly delivering him the car. 

I once bought a car from an individual from Quebec who advertised it in Globe & Mail. Again, he arranged for it to be delivered/sold to me by a dealer. In that case, the dealer did a 150 point checkup. Because they were out of province, I had to have the safety done when car was delivered to Ontario.

So it seems that this type of transaction is not uncommon.


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## nathan79 (Feb 21, 2011)

agent99 said:


> Last time I bought a new car, I found a buyer for one of our existing cars. I advertised it with safety, so I obtained the safety once we agreed on price. Took the paperwork to the dealer and he processed it as a trade in. We were happy and so was buyer because dealer treated him as a customer in properly delivering him the car.
> 
> I once bought a car from an individual from Quebec who advertised it in Globe & Mail. Again, he arranged for it to be delivered/sold to me by a dealer. In that case, the dealer did a 150 point checkup. Because they were out of province, I had to have the safety done when car was delivered to Ontario.
> 
> So it seems that this type of transaction is not uncommon.


Very uncommon in BC. Perhaps it's an Ontario thing. You guys do some "different" things over there (like renting a hot water tanks).


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## sags (May 15, 2010)

Current owner to dealership to new owner..........2 ownership transfers.

I am not understanding how the dealership "flips" the ownership without paying the sales tax twice and the used vehicle information package twice.


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## agent99 (Sep 11, 2013)

sags said:


> Current owner to dealership to new owner..........2 ownership transfers.
> 
> I am not understanding how the dealership "flips" the ownership without paying the sales tax twice and the used vehicle information package twice.


Dealers don't pay sales tax when they acquire vehicles for resale. They just charge the new owner the sales tax when car is sold.


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## jollybear (Jun 28, 2015)

Really depends on the Province where this transaction takes place.....I`m in Manitoba so if the dealer processes the transaction for "your customer" They have to charge the new owner PST/GST. If you were to sell the car privately in Manitoba, the new owner does not pay GST. Therefore this concept doesn`t make sense to do in this province.


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## agent99 (Sep 11, 2013)

jollybear said:


> Really depends on the Province where this transaction takes place.....I`m in Manitoba so if the dealer processes the transaction for "your customer" They have to charge the new owner PST/GST. If you were to sell the car privately in Manitoba, the new owner does not pay GST. Therefore this concept doesn`t make sense to do in this province.


According to this link, even for private deal in Manitoba , buyer has to pay retail sales tax when the vehicle is registered.

https://www.gov.mb.ca/finance/taxation/pubs/bulletins/054.pdf



> *Section 2 – PRIVATELY PURCHASED OR LEASED VEHICLES*
> 
> RST collectible at time of vehicle registration:
> 
> ...


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## jollybear (Jun 28, 2015)

Correct.....Provincial sales tax (RST) not GST if it`s a private sale. Basically if you buy a vehicle from a private individual you pay 8% Provincial sales tax when you register the vehicle with MPI. If you purchase a vehicle from a licenced dealer, they collect 8% Provincial sales tax (RST) and 5% GST, at that point no other taxes are collected when you register the vehicle with MPI.


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## alex_mercer (Sep 18, 2017)

*Trade in*

Selling drastically reduces the value of the car. Moreover, when you sell to someone you know very well, you're prone to emotional attacks and persuasion, thus depreciating its value further. I'm always on the lookout for good trade deals.


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## agent99 (Sep 11, 2013)

jollybear said:


> Correct.....Provincial sales tax (RST) not GST if it`s a private sale. Basically if you buy a vehicle from a private individual you pay 8% Provincial sales tax when you register the vehicle with MPI. If you purchase a vehicle from a licenced dealer, they collect 8% Provincial sales tax (RST) and 5% GST, at that point no other taxes are collected when you register the vehicle with MPI.


Understood. So buyer would be faced with paying the 5% GST if deal handled through dealer rather than privately. Buyer of new car would save both taxes (13%), or perhaps just 8% if the buyer of old car was compensated for the GST? 

Using this method saved me about $800 in HST on last new car purchased. And it was my new car dealer who suggested it! He also did all the leg/paperwork for both buyer & seller.


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## ian (Jun 18, 2016)

Just make sure you check for liens and do a Car Proof. You do pay a premium if you sell privately vs. trade in. You also get a break when you buy privately. Bought a car from a private seller this past June. We have no sales tax and there is no HST on private sales. The cost to get a lic. plate on it was $79. When buying privately, you also avoid that userous 'admin' fee that some dealers try to extract from buyers.


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## apu123 (Oct 13, 2017)

I usually buy my vehicles at salvage auction. I focus on late model low (such as hail or minor collisions) damage or stolen. Recent purchases included a stolen 2016 Mazda 3 with 9000 km, bought it for $8300 taxes in. I put in an extra $1000 for a keys,reprogramming, busted taillight and a busted aluminum wheel. I had it turned around and registered with new safety. Because it was stolen it had a regular title. Probably saved close to $15000 over buying something equivalent on regular resale market. I also bought a practically new salvaged 2016 Honda CRV with 450 km last year it still had the manufacturer's window sticker and paper dealer mats in the car. That one was a little more effort turn around to registration was just over two months. I sub out the minor frame repair and did the rest myself. All in it cost me $18000 but again saved at least $17000 over a new one. It has a salvage title but this is of little consequence to me as I usually drive my vehicles into the ground.


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## Newby1983 (Apr 9, 2015)

Bought a new car dealer offered me $200 for my old Kluncher I sold it on kijiji for $1700 Need to safety and etest. I spent 6 hours between pictures advertising getting safety tested and meeting potential buyer.


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## lonewolf :) (Sep 13, 2016)

What I have done in past is driven till a repair to car cost more then car is worth then give the car to someone that can fix the car @ a reduced cost & have them put a hitch on the back of my new drive to put bikes on.


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## new dog (Jun 21, 2016)

Also lonewolf at some point the stress of too many miles on the structure of the car makes it worth getting rid of.


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## twa2w (Mar 5, 2016)

Newby1983 said:


> Bought a new car dealer offered me $200 for my old Kluncher I sold it on kijiji for $1700 Need to safety and etest. I spent 6 hours between pictures advertising getting safety tested and meeting potential buyer.


1700-200=1500. 1500/6 hrs =250 per hour. Not bad use of your time unless you are a surgeon or opthamologist ;-)


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## twa2w (Mar 5, 2016)

new dog said:


> Also lonewolf at some point the stress of too many miles on the structure of the car makes it worth getting rid of.


Agree, when filling up your car with gas doubles its value, it's time to go.


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## new dog (Jun 21, 2016)

Or if the gas attendant asks if you bought the car somewhere or built it yourself.


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