Tax changes in B.C. could increase cost of used cars

It looks like you could be paying more for a used car as the B.C. government cracks down on tax evasion.

The tax you pay when buying a used car directly from its owner has changed in the province. As of Oct. 1, instead of calculating the PST using the sale price, the province says taxes will be based off the wholesale value of the vehicle.

The province says the change, first announced in February, is meant to prevent tax evasion from underreported sale prices.

Director of the Automobile Protection Agency, George Iny, says this change could increase how much you pay for a second-hand car.

“If you buy a used car privately with this change you’re not likely to pay more for the car but the overall transaction could be more,” he explained.

Related articles: 

• Canadian used car prices beginning to drop: report

• More people fixing their old cars due to lack of new supply, inflation

• Used car prices jump amid pandemic-induced shortages, lack of new vehicles

• Chip shortage keeps driving up auto prices, cutting sales

The Canadian Black Book will determine a car’s value, which Iny says could be problematic.

“In some cases, the car needs some important maintenance, maybe $1,000 or $1,500, it’s otherwise very good, they don’t want to spend the money. Maybe they’re selling it with no air conditioning, for example. Black Book wholesale value assumed the vehicle is in running condition.”

But used cars aren’t always in good condition, says owner of Goldline Motors in Vancouver, Tony Shahidi.

“Some cars, to be honest with you, they have serious problem,” he said.

Shahidi adds the tax change comes at a time when used car prices have skyrocketed.

“Used price cars went up 50 per cent, 60 per cent, sometimes more. Especially cheap cars, cheap cars I can say 100 per cent more.”

Iny says the spike in used car prices is tied to a similar increase in new car prices, with the pandemic, a worldwide microchip shortage, plant closures, and shipping issues all to blame.

“As a consequence, you end up with an interrupted and uneven vehicle supply. It’s been a terrible situation for the car makers and of course for consumers who are in the market for a new vehicle,” Iny explained.

In a statement to CityNews, B.C.’s finance minister, Selina Robinson, says the government has “taken significant steps to reduce costs for drivers.”

“The PST has been payable on privately purchased new or used vehicles since 2012,” Robinson added. “The change brings us into line with what most other provinces are already doing. It does not apply to trade-ins, and it’s good to remember the average wholesale value of a vehicle is lower than its estimated market value.

“We expect very few vehicles to be sold below the average wholesale price, but if people paid less than the average wholesale value due to the condition of the vehicle, they will be able to obtain an appraisal of the vehicle to lower the tax payable on the purchase.”