Stop the Sticker Shock: Your Simple Guide to the 13% Tax on a Car in Ontario
Buying a vehicle is an exciting step, but for residents of Ontario, there's one number that always causes a major headache: the sales tax. Whether you're purchasing brand new or checking out taxes on used cars, you must budget for a flat 13% sales tax.
Understanding vehicle tax in Ontario is the single best way to avoid a surprise when you finally go to register your new ride. Here is a simple, direct guide to everything you need to know about the tax on a car in Ontario.
The Bottom Line: What is the 13% Tax on a Car in Ontario?
The standard tax rate you will pay is 13%. This tax is known as the Harmonized Sales Tax (HST), which combines the federal 5% GST and the provincial 8% PST.
The primary difference for buyers isn't the rate—it's who you pay and when you pay it:
| Who You Buy From | Tax Paid | When It's Paid |
| A Registered Dealership | HST (13%) | Paid directly to the dealer at the point of sale. |
| A Private Seller | Retail Sales Tax (RST) (13%) | Paid to ServiceOntario when you register the vehicle in your name. |
A common question is: do you pay tax on private car sales in Ontario? The answer is a clear yes. Even if the seller doesn't collect it, the buyer must pay the full 13% when they transfer the ownership.
Read More: [Selling The Car in Canada].
Taxes on Used Vehicles in Ontario: The Government’s Catch
This is where many first-time buyers get caught off guard, especially when dealing with taxes on used vehicles in Ontario from a private sale.
The government has a rule to ensure buyers don't report a rock-bottom price just to save tax. For taxes on used car sale, the 13% tax for used car in Ontario is calculated on the higher of these two figures:
The Actual Price: The price listed on your bill of sale.
The Wholesale Value: The vehicle’s fair market value as determined by an official government pricing guide (often the Canadian Red Book value).
This means if you buy a car for $8,000 but the government appraises it at $12,000, you will be paying sales tax on used vehicles calculated on the $12,000 valuation.
Read More: [Toyota Sienna Second Hand]
Real-World Example: Sales Tax on Used Vehicles
If you are using an online Canada car tax calculator, you need the higher of these two values to be accurate:
| Price Paid | Government Wholesale Value | Taxable Amount | Tax Paid (13%) |
| $15,000 | $12,000 | $15,000 (Higher) | $1,950 |
| $10,000 | $12,000 | $12,000 (Higher) | $1,560 |
Read More: Learn about [Lease a Car in Canada].
How to Legally Reduce the Sales Tax on Cars Ontario Buyers Pay
While the taxes on a used vehicle are mandatory, there are two key legal ways to reduce the taxable amount you owe:
The Trade-In Discount: This is the most effective way to lower your tax bill. If you trade in your old car at a dealership, you only pay the 13% sales tax on cars Ontario on the net difference between the new car's price and your trade-in's value. You are essentially taxed only on the upgrade amount.
Gifting: You are legally exempt from the car tax sale if the vehicle is transferred to you as a gift from a qualifying immediate family member (including a spouse, parent, child, or sibling). You must complete a Sworn Statement form at ServiceOntario to finalize this transfer.
Connect with CarRookie
If you're ready to manage the sales tax on used vehicles in Ontario and find your next ride, CarRookie can help. Don't let a challenge like poor credit history stop your search. CarRookie is a trusted dealership that connects buyers across Canada to the top agents, even those with bad or poor credit, helping you navigate the entire purchase process seamlessly.
If you are just beginning to budget, start with an online Canada car tax calculator to prepare your finances.
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