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      08-09-2015, 09:32 AM   #1
sandecker
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Dealer trade in - "in/out" - Questions for 'insiders'

Is there anyone here with a good dealer contact or insight into the trade-in process in Ontario?

Specifically:
Lets say I can realistically do a private sale of my car for $26,000, which I then apply to the purchase of a new car.

OR...if I do dealer trade-in, the offer I get is $21,000, towards the purchase of a new or used car on the lot. Plus, I get the 13% HST credit of $2730. So value to me is $23,730 toward purchase on the new car.

So, the private sale puts me ahead $2270 in this scenario - setting aside for the moment the convenience argument of trade-in vs. private sale.

Now, lets say I find a buyer for my car at $26,000 - but instead of selling private we both march over to the local BMW dealer - and I request they do a trade-in @ $26,000 on the purchase of my new car, then immediately sell the car to my buyer for the same price (+13% HST).

The cost to my buyer is identical to buying it privately, since they would go and pay 13% when the car is registered, in the private sale. (setting aside fudging the selling price to lower taxes)

But now I get a trade in value of 26,000 + 13% tax credit of $3380 - which is a total value to me of $29,380 towards the purchase of my new car. (less say about $500 I expect the dealer would want to do the paperwork).

IN this scenario i'm ahead $2880 over selling private, and a whopping $5150 if I went the standard trade-in route. (less any dealer fees)

So my question(s) - how common is this done in Ontario? Is it legal? If so how willing are dealers to faciliate such a transaction, assuming you offer up a reasonable fee for the service and obviously buy a new car from them? Or do you require a close relationship with your SA for them to do you this 'favour', and/or would they typically frown on providing this service since you are basically taking away their trade-in they would normally profit from?

Comments appreciated!

Last edited by sandecker; 08-09-2015 at 09:52 AM..
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      08-09-2015, 10:26 AM   #2
bobblehead
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what you described can be done at a dealership, however, the dealer may want some sort of paper processing admin fee involved. I don't know how much, that's between you and the dealer in question. Nothing illegal of this kind of transaction at all.

There has been a few threads of this exact same situation discussed in the forum in the past and the person wrote it was very detailed. You just have to do a search. btw, I believed the dealer in question was done at Budds Oakville.
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      08-09-2015, 10:40 AM   #3
01ON19
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An interesting idea but I'm not sure why a dealer would do this unless your "reasonable fee" approximated what they would make in a more typical transaction. But, as you say, the dealer looks at the entire deal, including the profit on the new car sale so as long as they are in the same position they might do it. They would be less inclined to discount the price of the new car if they make nothing on the trade-in. So, I'm not sure if you are any better off.

You pay tax on the "net" price. There is no difference between:

1. $55,000 for new car less $26,000 trade in (net $29,000)
2. $50,000 for new car less $21,000 trade in (net $29,000)

It is all what you negotiate and it is the net price that matters.
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      08-09-2015, 11:32 AM   #4
sandecker
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Agreed - it all comes done to the net price - I was just curious if this was a common practice.

I get the sense that if you have a co-operative sales rep - and had negotiated a cash purchase price already - they don't really have anything to lose if you can deliver a buyer for your trade in at a 'private sale' valuation - especially if you offer up at least, say, a $500 admin fee for the effort. They still get the same cash sale price.

What it comes down to is avoiding as much HST as possible, a maximizing the sale price of your existing car.
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      08-09-2015, 11:55 AM   #5
Gearhead999s
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Yes it is a common practice to do this and expect a transaction fee of between $5-1000 to do this.There are administration costs associated with a "accommodation deal" plus you will be responsible for the safety & emmision test.
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      08-10-2015, 12:28 AM   #6
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This can be done at dealers and as others have said, you'll most likely need to pay some sort of admin fee for the paperwork. it's known as an accommodation sale as Gearhead mentioned.

Less advantageous for the buyer in QC since private party car sales would be taxed at 9.975% instead of the full 14.975%.
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