As if cars weren’t expensive enough, there’s sales tax on top of the sale price to worry about. And the higher the sticker price, the more you’ll pay in sales tax on cars in Ontario.
Read on to find out how much sales tax costs when buying a vehicle, and how this tax will affect your purchase.
Key Points:
- The sales tax rate on vehicle purchases in Ontario is a flat 13%.
- How the sales tax is collected depends on whether you’re buying a used vehicle from a private seller or dealership.
- If you’re taking out a car loan, you can add the sales tax to the loan and spread out the cost.
How Much Is The Sales Tax On Cars In Ontario?
When you buy a car in Ontario, you’ll need to pay sales tax, much like you would when you purchase other goods and services. In this province, a 13% tax applies.
If you’re buying from a dealership, this tax is known as the Harmonized Sales Tax (HST). When buying from a private seller, this tax is known as the Retail Sales Tax (RST). Both tax rates are 13%.
Do You Pay Sales Tax On Dealership Sales In Ontario?
If you buy a car from a dealership, the dealer will collect the 13% applied to the purchase price of the car, then remit these taxes to the Canada Revenue Agency (CRA). Sales tax applies whether the vehicle is new or used.
Do You Pay Sales Tax On Private Car Sales In Ontario?
If you buy a used car from a private seller, you may not be charged 13% by the seller, since they’re not registered to remit GST/HST like a car dealer. In this case, a private non-registered seller does not have to collect sales tax for the government.
However, when you register your car in your name at a Service Ontario location, you’ll be required to pay the provincial RST of 13%.
The RST calculation is based on either the purchase price of the car, or its wholesale value according to the Canadian Red Book, whichever of the two is higher. If the vehicle’s Red Book value is under $1,000, the RST will be based on the purchase price.
How To Calculate Sales Tax On Cars In Ontario
As mentioned, the sales tax in Ontario, or HST, is 13%. To calculate the HST on a vehicle purchase, follow these steps:
- Determine the price of the car.
- Multiply the purchase price of the vehicle by 13% (0.13) to determine the HST/RST owed.
- Add the purchase price of the car and the HST/RST amount together to arrive at the total amount payable.
To give you an idea of how much a vehicle purchase will cost you, here are a few examples of various car prices, the applicable HST, and the final purchase price including tax:
| Vehicle Purchase Price | HST/RST | Final Purchase Price |
| $20,000 | $2,600 | $22,600 |
| $35,000 | $4,550 | $39,550 |
| $50,000 | $6,500 | $56,500 |
| $60,000 | $7,800 | $67,800 |
How Does Sales Tax Affect Car Loan Cost?
When you shop for a car, you should not only consider the MSRP and ticket price but also the additional sales tax you’ll have to pay. In Ontario, a 13% sales tax is a hefty amount and can increase the final purchase price by quite a bit. Be sure to take into consideration the entire cost of a vehicle before committing to a purchase.
If you’re financing your vehicle purchase with an auto loan, you can add this additional tax charge to the total loan amount.
Let’s illustrate how sales tax affects your car loan using a $40,000 vehicle purchase, a 5-year loan term, and a 7.89% interest rate. The following chart compares two car loans: one excluding sales tax with the 13% HST paid upfront ($5,200), and one including sales tax:
| Car Loan Excluding Sales Tax | Car Loan Including Sales Tax | |
| Car Price | $40,000 | $40,000 |
| Car Sales Tax | nil | $5,200 |
| Total Car Cost | $40,000 | $45,200 |
| Total Loan Amount | $40,000 | $45,200 |
| Term Length | 5 years | 5 years |
| Interest Rate | 7.89% | 7.89% |
| Monthly Payment | $808.95 | $914.12 |
| Total Interest Payable | $8,537.10 | $9,646.92 |
As you can see, rolling your sales tax into the loan will increase your monthly payment by over $105 and your total interest payable by nearly $1,110. While coming up with a lump sum of $5,200 upfront to pay for sales tax may sound like a lot, you’re paying an extra $1,110 by rolling it into your loan.
Is There A Luxury Sales Tax On Vehicle Sales In Ontario?
Yes, a luxury sales tax applies to new vehicles with a retail price of at least $100,000 or more that are still subject to registration. This tax was introduced as part of the 2021 Federal Budget and targets high-income consumers to contribute more to the tax system.
| Note: If the luxury sales tax was already paid when the car was first bought by the original purchaser, subsequent buyers of the same used car will not have to pay it again. |
How Do Car Sales Taxes Differ In Other Provinces?
Ontario car drivers must pay 13% tax when they buy a vehicle. But how does this tax rate compare to other provinces across Canada?
Taxes On New And Used Cars From A Dealership In Canada
| Province | Total Tax Rate |
| Ontario | 13% |
| British Columbia | 12% – 25% |
| Alberta | 5% |
| Saskatchewan | 11% |
| Manitoba | 12% |
| Quebec | 14.975% |
| New Brunswick | 15% |
| Nova Scotia | 15% |
| Newfoundland | 15% |
| PEI | 15% |
Taxes On Used Cars When Buying From A Private Seller
| Province | Total Tax Rate |
| Ontario | 13% |
| British Columbia | 12% – 20% |
| Alberta | N/A |
| Saskatchewan | 6% |
| Manitoba | 7% |
| Quebec | 9.975% |
| New Brunswick | 15% |
| Nova Scotia | 15% |
| Newfoundland | 15% |
| PEI | 15% |
Learn more: Taxes On Cars In Canada: Dealership vs. Private Sale
Tips To Minimize The Impact Of Sales Tax On Car Prices And Loans
Saving money on sales tax when buying a car essentially comes down to reducing the purchase price of your car. The lower the ticket price, the less you’ll pay in taxes. Here are a few ways to keep your purchase price low to save on sales tax:
- Buy A Cheaper Used Car: Buying a second-hand vehicle is typically much more affordable than buying new. You can save a considerable amount of money by buying used, which will reduce your sales tax obligations. Plus, used cars do not lose their value as quickly as brand new vehicles.
- Negotiate: Consider negotiating the car sales price to a lower amount. For example, you could ask the seller to lower the car’s price to help offset some of the tax costs.
- Review & Reduce Extra Fees: Some dealers add non-essential fees, such as administration or add-on packages, which are then subject to tax. Carefully review the purchase contract and negotiate to remove or reduce these fees before committing to the deal, and keep the taxable amount as low as possible.
Can Trading In Your Car Reduce The Sales Tax You Pay?
Yes, if you have a car you’d like to trade in, this will decrease the taxes you owe. Plus, it will help lower your total upfront or financing costs.
For example, if you have a $5,000 car to trade in and want to buy a $20,000 car, you can reduce the cost to $15,000. That means you’ll only need to finance $15,000 and will pay taxes on the reduced amount of $15,000.
Are There Any Sales Tax Exemptions?
In Ontario, you don’t have to pay RST to the seller if:
- You receive the car as a gift from a family member.
- You bought a car in another province and are now moving to Ontario.
- You’re of Indian Status or a foreign representative who is exempt.
- You receive the car as part of an estate bequest.
Can You Get An RST Refund?
You may claim an RST refund or rebate if:
- You were eligible for an RST exemption.
- You moved out of Ontario permanently 30 days after purchasing the car.
- The car’s value is reduced due to excessive use or damage.
To claim a refund, please download the forms here.
How Are Taxes Handled When Gifting A Vehicle To A Family Member?
In Ontario, certain tax exemptions may apply when a vehicle is transferred as a gift between family members. To complete the process, the recipient must submit a Sworn Statement for a Family Gift of a Used Motor Vehicle, which is available both online through Service Ontario and at physical locations.
Learn more: Gifting A Car In Ontario: Everything You Need To Know
Other Costs To Consider
The ticket price of the car and sales tax aren’t the only costs you’ll have to pay. Before you buy a car, make sure you’ve considered all associated costs, including the following:
Licencing & Registration Fees
After you buy a car, you must register it with the Ontario Ministry of Transportation (MTO). The cost includes plate registration, sticker renewal, and vehicle permit fees. You can expect to pay around $100 to $200 or more, depending on the type of vehicle and registration.
Insurance Premiums
Car insurance is mandatory in Ontario. The cost of these premiums varies based on your driving history, location, and vehicle type. That said, you can find yourself paying over $1,000 per year or more, with new drivers or owners of high-risk vehicles paying considerably more.
Learn more: Cost Of Car Insurance In Ontario For New Drivers
Safety Standards Certification
A safety standards certification is required for used vehicles bought privately in Ontario. The cost varies, but typically ranges from $100 to $150.
PDI & Freight Charges
PDI (Pre-Delivery Inspection) is the charge for the dealership to inspect the vehicle for the customer. Freight is the charge for transporting a vehicle from the factory to the dealership. Both fees are usually set by the manufacturer, though some automakers allow dealers to set their own PDI costs.
Final Thoughts
If you’re buying a car in Ontario, you’ll have to pay sales tax on top of the purchase price. Regardless of whether you’re buying new or used. At 13%, the HST applied to car sales can add a significant amount to the overall purchase price and can also increase your auto loan amount if you finance. Crunch the numbers to ensure you can comfortably afford the total purchase price of a vehicle before buying.
