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

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

In Prince Edward Island, when you trade in your existing vehicle at a licensed dealership towards the purchase of a new or used car, you benefit from a significant sales tax reduction. The 15% Harmonized Sales Tax (HST) is applied only to the *net price* of the vehicle, which is the agreed-upon purchase price minus the value of your trade-in. This means you effectively avoid paying HST on the portion of the new vehicle's value that is covered by your trade-in, directly lowering the total taxable amount. This provincial regulation is a substantial financial advantage for consumers, as it reduces your overall out-of-pocket expenses and, crucially, the principal amount you need to finance through a car loan. A lower financed amount translates directly into smaller monthly payments and less interest paid over the entire term of your loan, offering considerable long-term savings. It is always advisable to confirm the specific application of this benefit and the trade-in valuation with your PEI dealership to ensure clarity on your final purchase price and financing arrangements.

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