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In NL, what should I know about trade-in tax benefit for car loans?
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Car Loan Glossary • nl

In NL, what should I know about trade-in tax benefit for car loans?

In Newfoundland and Labrador (NL), you benefit from a significant tax advantage when trading in a vehicle at a licensed dealership towards the purchase of another. Specifically, the Harmonized Sales Tax (HST), currently 15% in NL, is applied to the *net price* of the new vehicle, rather than its full selling price. This means the value of your trade-in is deducted *before* the HST is calculated, effectively reducing the amount of tax you pay. For example, if a new vehicle is priced at $30,000 and your trade-in is valued at $10,000, you would only pay HST on $20,000, saving you tax on the $10,000 trade-in portion.

This provincial nuance is crucial for consumers, as it directly lowers the overall cost of your vehicle purchase. A reduced taxable amount translates to a smaller principal for your car loan, resulting in lower monthly payments and less interest accumulated over the loan's term. This practice is a consistent feature of auto sales in HST-harmonized provinces across Canada and is expected to continue into 2025, providing a valuable incentive for consumers to trade up. Always ensure your dealership clearly itemizes the trade-in value and the HST calculation on your bill of sale to confirm this benefit.

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