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It's not really a tax credit, but it is a reduction in the amount of tax you pay. For example, if you buy a new Camaro for $45k and have no trade in then you pay PST & GST (HST eventually) on $45k. However, if you trade in a vehicle worth $20k, then you would only pay PST & GST (HST eventually) on the difference between the purchase price and your trade in ($45k (purchase price - trade-in value $20k) so you'd pay PST & GST (HST eventually) on $25k.
That's how it works in Ontario anyway. The current benefit of selling privately is the potential buyer only has to pay PST, so technically you as the seller and the potential buyer could "share" the GST savings & dealer mark-up (profit). So you usually get more $ selling it privately and they save money because they can usually pay you more then a dealer will and don't have to pay the GST. With the HST, one of the benefits is removed. So the higher value of your trade-in vehicle the more beneficial it becomes to trade-in as opposed to selling privately.
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