Demonstrator vehicles hold a special place in the car sales world. Like new vehicles, they are often eligible for manufacturer’s incentives and programs. However, legally, they are still used vehicles.

This is because once a vehicle has been registered to an owner, it is a used vehicle, even if that owner is the dealership. Demos are registered to the dealership so that customers and even employees can take them on trips to “demonstrate” them. Many are often white plated by the dealer. Regardless of the actual mileage of the vehicle, they are used vehicles.

This has important implications for how your dealership advertises and sells these vehicles. Since they are used vehicles, they must be advertised as such. Dealers are expected to use actual photos of the vehicle in advertisements, include the actual history of the vehicle, the status of the vehicle, the odometer reading, as well as information on when the warranty for the vehicle began and the remaining warranty coverage.

Also, keep in mind that because a demonstrator is a used vehicle, when advertising, comparisons to MSRP are not allowed, nor are charges for freight, air and gas tax.

This also means that when registering a new “subject vehicle” above the $100,000 threshold (and which meets all other requirements) to use as a demo, the dealer is responsible for paying the luxury tax for that vehicle. The dealer would not charge the customer luxury tax on a demo vehicle because the dealer is expected to have already paid it and the customer is now buying a used vehicle. The Government of Canada’s website makes this very clear:

https://tinyurl.com/4p8a6uc3

A dealership that is a registered vendor of subject vehicles registers with the Ontario Ministry of Transportation a subject vehicle in its inventory valued above $100,000 in order to use the subject vehicle as a demo vehicle.

The luxury tax is payable by the dealership at the particular time that the subject vehicle is registered with the Government of Ontario.

Demo vehicles are also treated uniquely under the Highway Traffic Act. Regulation 628 of the Highway Traffic Act also provides an exemption on the requirement for a safety standards certificate for demo vehicles that have been operated for 6,000 kilometers or less:

R.R.O. 1990, Reg. 628 VEHICLE PERMITS | ontario.ca

2. (1) Number plates shall not be approved for use on a motor vehicle and evidence of validation shall not be issued for a number plate unless the motor vehicle’s permit indicates a fit status.
3. Reg. 172/22, s. 2 (4).
   • A permit indicating a fit status shall not be issued for a used motor vehicle unless a safety standards certificate was issued upon an inspection of the vehicle that was completed within the preceding 36 days. O. Reg. 172/22, s. 2 (4). 

• Subsection (2) does not apply,

…

(d) to an application for a permit for a motor vehicle that has been operated 6,000 kilometres or less and for which a permit has been issued under section 7 of the Act in the name of a motor vehicle dealer described in clause (b) or

(c) and has not been in the name of a person other than such a dealer;

… 

Since demo vehicles are used vehicles, it is recommended that dealers perform a thorough inspection of the vehicle before it is sold to a customer. While the vehicle is more than likely to be in tiptop shape, the inspection is important so that the dealer can make any required disclosures to the customer. If the dealer fails to perform a thorough inspection of the vehicle and issues arise, this could spell trouble with both MTO and OMVIC.

Members with questions on how to advertise or sell a demo vehicle can contact the UCDA’s Legal Department at (416) 231-2600 or 1-800-268-2598.