Trade-In vs Private Sale: Selling Your Car in Canada

When you replace a car, the old one can go to the dealer as a trade-in or be sold privately. A private sale can bring a higher price, while a trade-in is quicker, takes the paperwork and the payment risk off your hands, and lowers the sales tax on the car you are buying. This page compares what each nets you once that tax saving is counted, then walks through a private sale step by step: pricing, paying off a loan, getting paid safely and the transfer paperwork in Ontario, British Columbia and Quebec. It is part of our guide to buying a car in Canada, where selling the car you have now is the last step.

Trade-in or private sale at a glance

The Ontario Motor Vehicle Industry Council (OMVIC), the province’s dealer regulator, sums up the trade-off on its trade-in page: dealers generally offer the wholesale value of a trade-in, which could be less than a private sale brings, but trading in is easier, faster and more secure, avoids no-shows, the ownership transfer and getting secure payment, and comes with tax savings.

How dealers value a trade-in

A dealer buys a trade-in to recondition and resell it, so its offer is measured against wholesale value, not the retail asking prices in listings. OMVIC lists what moves a trade-in’s value: the vehicle’s popularity, its condition, mileage and colour, and even the time of year and location. Recent repairs and improvements, such as new tires or brakes, can raise the offer because they cut the dealer’s reconditioning costs, while much-needed repairs bring it down.

Before taking an offer, you can check the Canadian Black Book’s free wholesale estimate, get an appraisal from another dealer (some will offer to buy the car outright), and remember that OMVIC notes trade-in values can be negotiated and vary between dealers. Settling the price of the new car before the trade-in comes up keeps one number from being adjusted to offset the other; the order to negotiate in is covered in how to negotiate a car price.

The sales tax a trade-in saves

When a dealer accepts your used vehicle, or other used goods, as full or partial payment, the GST or HST is charged on the price minus the amount the dealer credits you for the trade-in, as long as you aren't required to collect GST/HST on the trade-in yourself, as a registrant trading in a business asset would be. Provinces with a separate sales tax have their own trade-in rules, and some attach conditions; sales tax on a car shows which taxes the trade-in reduces in each province and the saving on an example purchase. A private sale earns no such saving, and the car you buy afterwards is taxed on its full price.

What each option nets you

The last row is the break-even: the trade-in offer, plus the tax it saves, plus what the private sale costs you. A private price above it nets you more than the trade-in; one below it nets you less. The tax saving is the trade-in value times the sales tax the trade-in reduces, so the break-even sits further above the offer where that tax is larger. The comparison leaves out your time and the risk of a sale falling through, which only you can put a price on, and the saving applies only when you buy the next car from the dealer taking the trade-in.

A loan still owing on the car

A lender with a loan on the car usually holds a lien on it, and the lien stays with the car after a sale. Ontario’s used vehicle information package page explains that a lien claimant has a right to the car, or the amount of the lien, from the buyer once the transfer is completed, which is why private buyers check for one.

• Trading in: OMVIC advises calling your lender for the loan payout (the amount still owing) and checking the figure the dealer uses. Ontario dealers are required to remove liens on trade-ins as soon as possible, and OMVIC points to a payment still coming out of your account for the traded-in car as an early warning sign that the loan was not paid in full.
• Selling privately: the payout comes from the sale proceeds, your own money or both. A buyer who finds the lien will expect it to be cleared, so the lender’s payout figure and how it releases the lien are worth having before you list the car.

Negative equity on a trade-in

If the car is worth less than the loan, you have negative equity. The Financial Consumer Agency of Canada explains that trading in to buy another car in that position may mean borrowing to cover both the new car and the amount still owed, which leaves a larger car loan and more interest to pay. How loan length and the down payment lead to owing more than the car is worth is covered in how to finance a car.

Selling privately, step by step

1. Confirm you can sell it. The car needs to be registered in your name, with the registration documents to prove it. Find the payout on any loan.
2. Set the price. ICBC, British Columbia’s public insurer, suggests researching the value by comparing your car with others for sale online and in newspapers, and asking mechanics what they would pay. The dealer’s trade-in offer and the break-even above set the floor worth accepting.
3. Prepare the car. ICBC suggests gathering receipts for maintenance, repairs and after-market parts, buying a vehicle history report to show buyers, getting an optional pre-purchase inspection and cleaning the car. In Ontario, the seller also buys the used vehicle information package before the sale (see below).
4. Advertise and show it. ICBC lists online and newspaper ads, a For Sale sign in the car and telling friends, family and neighbours, and suggests having someone with you if buyers come to your home.
5. Get paid safely. See the next section.
6. Transfer the ownership. Each province has its own documents and steps, set out below. Remove your licence plates and cancel your insurance or move it to your next car.

For what buyers look for in return (inspection, history reports, what to ask a seller), see the used car buying guide.

Getting paid safely

ICBC recommends accepting only cash or a bank draft, not a personal cheque, and verifying any bank draft at the financial institution that issued it before finalizing the sale. It also recommends going to the registration office with the buyer, so the transfer is processed promptly and your name, insurance and licence are removed from the vehicle record; in Quebec the transfer is done online, and the seller keeps the car until the buyer has accepted it (see below).

Seller’s paperwork by province

Each province runs its own vehicle registry, so the documents differ. Ontario, British Columbia and Quebec are below; elsewhere, the provincial vehicle registry lists what a seller provides.

Ontario

Ontario’s buy-or-sell page sets out what the seller does. Before the sale, the seller buys a Used Vehicle Information Package (UVIP), checks that the vehicle identification number (VIN) on the car matches the one on the permit, and checks that no money is owing on the vehicle. The seller is legally required under the Highway Traffic Act to give the buyer the UVIP, which also shows any lien on the car.

At the sale, the seller gives the buyer:

• the UVIP;
• a signed bill of sale with the seller’s name, the buyer’s name and address, the date and the purchase price;
• the completed and signed Application for Transfer on the back of the ownership permit (the vehicle portion);
• a certificate from a licensed mechanic that the vehicle meets safety standards, if one is required.

The seller keeps the licence plates, which travel with the driver rather than the car, and the plate portion of the permit. The buyer registers as the new owner within 6 days of the purchase and pays the retail sales tax at registration, not to the seller. A transfer to a close family member as a gift can be exempt from that tax.

British Columbia

ICBC’s steps for selling a used vehicle list what the seller brings to an Autoplan broker to transfer ownership:

• the original signed insurance and vehicle registration document (APV250), both parts;
• a Transfer/Tax Form (APV9T), with all four pages complete and original signatures.

At the sale, the seller removes the licence plates, gives the buyer the signed registration portion of the APV250, and fills out and signs the APV9T after being paid. The buyer must register the vehicle within 10 days of purchase and pays the tax on the sale. BC’s PST on a private vehicle sale is covered on sales tax on a car.

Quebec

The SAAQ lets two individuals transfer a vehicle online on SAAQclic, without going to a service outlet. The seller and the buyer must both be 18 or older and have a SAAQclic account, and the vehicle must:

• be a passenger vehicle (automobile, motor home or SUV);
• be less than 25 years old;
• be registered in Quebec;
• be registered under one name or, if co-owned, have a designated registrant;
• have no unpaid fines.

The seller starts the transfer on SAAQclic with the buyer’s SAAQ identification number (driver’s licence number), and must not let the buyer leave with the car until the buyer accepts the transfer, since the seller could be held responsible for offences committed while the car is still in their name. The buyer then has 48 business hours to accept the transfer and register the vehicle, and the QST and registration fees are debited from the buyer’s bank account. Because the registration certificate is not a title to property, the SAAQ recommends that buyer and seller draw up a sales contract, and that the buyer check the Register of personal and movable real rights (RDPRM) for any debt on the vehicle.

Related guides

• How to negotiate a car price
• Used car buying guide
• New vs used cars
• How to finance a car
• Sales tax on a car