The New HST Will Kill Private Vehicle Sales

Published in the Serious Buyer, Serious Seller Eletter, June 16, 2010, Written by Viraf Baliwalla

As of July 1, 2010, Ontario and BC will join several Maritimes provinces in introducing a harmonized sales tax. Government claims are that a harmonized tax process will create efficiencies and therefore cost reductions which can then be passed on to consumers. I don't buy it! But don't get me started on that, that's a topic for a different day. In this issue, I would like to explain how the HST will affect private vehicle sales.

Unlike the US where there is no federal sales tax on vehicles, when you currently buy a vehicle through a dealer in Canada, you pay both a federal and provincial sales tax (except Alberta where there is no PST). In Ontario, for example, the tax is 13%, 5% federal tax (GST) and 8% provincial tax (PST). So, for a $10,000 vehicle, you will pay an astronomical $1,300 in government taxes for the privilege of spending your money.

If you buy a vehicle privately, however, GST does not apply. This savings gives the private seller a slight price advantage over dealers, if both had the same vehicle, and allowed the public to enjoy a vibrant private sale market. As a result, consumers had the option of getting a fair market value by selling a vehicle themselves or trading it in to a dealer for a wholesale price.

As of July 1, everything changes. Regardless of whether you buy a vehicle privately or through a dealer, you will be required to pay the HST. In Ontario it will be the combined 13%. So if there is no advantage to buying a vehicle privately, then most consumer buyers will feel more secure and protected about buying from a licensed dealer. And, if there isn't a market for the private sellers, they will be forced to either take much less as a trade in or reduce their selling price by quite a bit to make it worthwhile for a buyer. Sadly, you may as well just trade it in and avoid the hassles.

Dealers are cheering about this because it supposedly creates a level playing field. Well, Automall Network has a dealers license and I think that although this may be good for dealers, this is a tragic mistake for the public.