# How does taxation on automobiles work?



## Jaredcom (Feb 23, 2011)

I mean taxation on new automobiles from a dealership as opposed to taxation on pre-owned ones. Someone told me that when you buy a new car from the dealer, you pay taxes and get a warranty, but when you buy a car off someone, you pay no taxes but get no warranty - you could then go to the dealership and pay them for a warranty if you car isn't too old. Is this true


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## Eric (Oct 20, 2009)

When you buy a car from an individual you still pay taxes and you get no warranty. Then you have to pay car license fees for the plates and insurance fees.

Depending on the car and on your age, the annual insurance fee could be very substantial.


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## the-royal-mail (Dec 11, 2009)

You always pay taxes, whether the car is new or used from a dealer or from individual. 

The warranty has nothing to do with it. That depends on what you are buying and from whom. Each deal is different when it comes to warranties. Inquire with the seller at the time of shopping or purchase decision.


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## sprocket1200 (Aug 21, 2009)

sounds like you are trying to save money. why would you ever buy a new car?


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## BBB (Jun 13, 2011)

Say if I was to sell my used car to someone or to a dealership, do I have to pay any taxes on the sale?


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## Plugging Along (Jan 3, 2011)

If you buy from a private sale (individual, not business), you do not pay tax on it. I assume you're talking about GST? You can buy 3rd party warrenty, or dealship warrenty, but its usually not worth it. 

If you are selling your vehicle privately, and this is not your business, you do not pay income tax on the sale.


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## the-royal-mail (Dec 11, 2009)

^ I don't think that's correct, PA. It depends on what type of individual it is. If he is not licensed as a dealer (some are retired and still have their business license and sell now and then on the side), then you don't pay any tax to him, but when you go to register the vehicle under your name, the DMV will ask for your bill of sale and you will have to remit the tax payable to them.

I'm of course talking about a private sale from an individual to an individual, as in your 1st point.


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## andrewf (Mar 1, 2010)

There is still sales tax applied to used cars even though that goes against the principle of a 'value-added tax'. Supposedly, this is to maintain 'fairness' with new car dealers. Absolute nonsense.

Moral of the story... don't buy and sell cars frequently.


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## Charlie (May 20, 2011)

In BC you'll pay sales tax either way. If you buy privately, you'll pay when you register the title....otherwise the dealer will collect. You used to save the tax on your trade in value if you traded in to a dealer -- but I don't know if that's still the case.

I like sprockets comment.

You don't pay income tax on selling a used vehicle because you usually don't have a gain. If you do make money, you would be subject to tax. Your loss is considered personal.


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## Plugging Along (Jan 3, 2011)

I'm thinking I'm liking AB more and more. I don't believe there's any sales tax on any used cars in a private sale. 

I also thought that there is a clause on the tax act that says if you see a personal effects item for a profit, there is no tax, however, it cannot be for a business. If you sell your ferrari at a profit, you don't pay tax, if you're not constantly do it for the purpose of resale.


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## MoneyGal (Apr 24, 2009)

If you dispose of personal property and have a gain of more than $1,000, that gain is a taxable capital gain. 

Capital losses on the disposition of personal-use property are not claimable except in very specific circumstances. 

http://www.cra-arc.gc.ca/tx/ndvdls/.../lns101-170/127/cmpltng/prsnls/prsnl-eng.html

The rules are different for "listed personal property," which may appreciate in value over time. 

http://www.cra-arc.gc.ca/tx/ndvdls/...ncm/lns101-170/127/cmpltng/lstd/menu-eng.html


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## Plugging Along (Jan 3, 2011)

Thanks for the clarification MG! You're awesome in your knowledge.


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## MoneyGal (Apr 24, 2009)

All this stuff is covered on the CFP exam...if you're going to pass that sucker, you need to know all this and more.


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## Plugging Along (Jan 3, 2011)

That's why I didn't finish my designations ... glad you did though


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