The Saskatchewan Automobile Dealers' Association (SADA) is clarifying what the PST on used cars means for dealers and the public, and said: “it’s going to be a benefit all the way around.”
This week’s provincial budget removed the six per cent PST exemption on used vehicle sales but as SADA director Maurice Plemel explained, the tax is not on the total sale price and there will be no price increases.
“The buyer is paying tax on the difference between the sale price and trade-in only,” he said.
paNOW spoke to local used car dealers this week who were unhappy about the prospect of customers having to pay over $1,000 on a vehicle valued at $17,000 as an example. They were also miffed about the government’s repeated taxation of the same asset each time it is traded-in.
But Plemel said it doesn’t work that way.
“It’s going to make dealing for customers of used and new cars dealers very open, transparent, easy to understand, and it’s not going to raise the price of used vehicles,” he told paNOW.
Plemel used the example of a $20,000 used car with a $10,000 trade-in. He said before the budget announcement the tax would be on the full $20,000 or $1,200, giving a total transaction price of $11,200. Today, he says, with only the difference taxed along with the trade-in allowance that transaction price remains unchanged.
“The trade-in of $10,000 is discounted by six per cent so that equals $9,433,” he said. “So the difference, which is now $10,567 is taxed at six per cent, or $633, which amounts to the same $11,200 transaction price.”
So, if there’s no price change on used vehicles how is the government going to boost their coffers via this change in tax policy?
On that point, Plemel was more skeptical.
“I’m not sure where they got their numbers from; I don’t think they’re going to raise the money they think they will,” he said. “There will be some small incremental increases whereby if, for example, we turn a $1,000 profit on a used vehicle in trade then the government will get $60 in tax. But it’s not going to be huge amounts.”
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