Tax on a Car in Ontario

If you’re buying a vehicle in Ontario, be prepared for the 13% sales tax, this is the single most important number you need to budget for. Understanding vehicle tax in Ontario is crucial, whether you’re buying new or looking at taxes on used cars.

Here is a straightforward guide to how sales tax works on vehicles, designed to answer the most common questions from Canadian buyers.

1. How Much is the Tax on a Car in Ontario?

The tax on cars in Ontario remains a flat 13% HST for most purchases, covering both new and used vehicles – key for budgeting amid rising car prices. This applies universally as car sales tax in Ontario, whether from dealers or private sellers, with no changes in 2026.

Read More: Selling The Car in Canada

The 13% Tax on a Car in Ontario: When and What You Pay

The main difference in how you pay depends on where you buy:

Where You Buy	Tax You Pay	When You Pay
From a Dealership	Harmonized Sales Tax (HST) – 13%	Paid directly to the dealer at the time of purchase. The dealer remits the tax to the government.
From a Private Seller	Retail Sales Tax (RST) – 13%	Paid directly to ServiceOntario when you register the vehicle in your name.

Crucially, do you pay tax on private car sales in Ontario? Yes, you do. While the seller does not collect the money, the buyer must pay the full 13% tax when registering the vehicle.

Read More: Toyota Sienna Second Hand

Taxes on Used Vehicles in Ontario: The Surprise Calculation

When buying taxes on used vehicles in Ontario, especially from a private seller, the tax calculation is often a surprise for first-time buyers. The government has rules in place to prevent people from declaring a low price to avoid tax.

The tax for used car in Ontario is calculated on the higher of these two amounts:

The actual purchase price (the amount you paid the seller).
The wholesale value of the vehicle (the fair market value determined by the government’s official pricing guide, often called the Canadian Red Book value).

This means if you buy a vehicle for $10,000 but the government values it at $15,000, you will be paying sales tax on used vehicles calculated on the $15,000 amount (13% of $15,000 = $1,950 in tax). This is the key difference you need to know about taxes on used car sale.

Read More: Lease a Car in Canada

How Much Tax on a Used Car in Ontario: An Example

To calculate your total cost, you can use a vehicle tax calculator Canada tool for an estimate, but the formula is simple:

Scenario	Calculation	Tax Paid
You buy for $12,000	Government Wholesale Value: $10,000	13% of $12,000 = $1,560 (Purchase Price is Higher)
You buy for $10,000	Government Wholesale Value: $12,000	13% of $12,000 = $1,560 (Wholesale Value is Higher)

Electric Vehicle Tax Incentives

Ontario offers rebates up to $7,000 on eligible new EVs through federal and provincial iZEV programs, reducing the pre-tax purchase price before 13% HST applies. Used EVs may qualify for partial rebates if under certain age/mileage thresholds, but private sales still trigger full RST on the greater of price or wholesale value. Include a table of 2026-eligible models for buyer appeal.

Incentive Type	Max Rebate	Applies To
New EVs	$5,000 federal + $2,000 provincial	Battery capacity ≥7 kWh
Used EVs	Up to $4,000	From registered dealers only

How to Legally Lower the Ontario Sales Tax on Used Cars

While the taxes on a used vehicle are mandatory, there are two legal ways to reduce the taxable amount:

Trade-In: If you trade in your old car at a dealership, you only pay the 13% sales tax on cars Ontario on the difference between the price of the new car and the trade-in value. This is the biggest tax saving most buyers realize.
Gifts: You do not have to pay the car tax sale if the vehicle is given to you as a gift from a qualifying immediate family member (spouse, parent, child, sibling, etc.). You must complete a Sworn Statement form at ServiceOntario

Read More: Good Used Cars Under $20,000

Tax on New Car Purchases

For tax on new car buys, expect 13% HST added directly to the sticker price at dealerships, remitted by the seller. Electric models may offset this via rebates applied pre-tax, but standard gas/diesel cars carry the full load – no exemptions. Example: A $40,000 new sedan incurs $5,200 in tax on new car costs.

Car Sales Tax in Ontario: Dealer vs. Private

Car sales tax in Ontario hits 13% regardless of source, but payment timing differs: upfront at dealers, or at Service Ontario for private sales. Trade-ins reduce the taxable base only at dealers, saving thousands on the net amount. This clarifies the “where you buy” table in your original article.

How Much is Sales Tax on a Used Car in Ontario

“How much is sales tax on a used car in Ontario” is 13% on the higher of your purchase price or the government’s wholesale value (e.g., Red Book). A $15,000 used SUV valued at $18,000 means $2,340 tax—budget this surprise. Add a calculator link and example table here for high-search intent

Used Car Price	Wholesale Value	Taxable Base	Sales Tax (13%)
$15,000	$18,000	$18,000	$2,340
$20,000	$19,000	$20,000	$2,600

Sales Tax on Cars in Ontario: EV and Import Rules

Sales tax on cars in Ontario applies post-rebates for EVs (up to $7,000 off new models) and on imports from out-of-province, using the greater of price or appraised value. Commercial vehicles may dodge full rates if business-exempt. Tie this to your “how to lower tax” section for completeness

Connect with CarRookie

Ready to buy your next car and manage the sales tax on used vehicles in Ontario? Don’t let a poor credit history stop you. 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 looking for a quick estimate on what your tax bill will look like, simply use a Canada car tax calculator online to get prepared.

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Tax on Cars in Ontario: FAQs

What is the tax on cars in Ontario for 2026 purchases?

The tax on cars in Ontario is a flat 13% HST, blending 5% federal GST and 8% provincial PST—no rate changes this year. It applies to nearly all passenger vehicles, from sedans to SUVs.

How does car sales tax in Ontario differ for private sales?

Car sales tax in Ontario is 13% RST for private sales, paid at Service Ontario during registration, not to the seller. Dealers collect HST upfront and remit it, but private buyers risk audits if the declared price undercuts wholesale value.

How much is sales tax on a used car in Ontario if bought for $20,000?

How much is sales tax on a used car in Ontario depends on the higher of your $20,000 price or the Red Book wholesale value – say it’s $22,000, then expect $2,860 (13% of $22,000). Always check values pre-purchase to avoid surprises.

What is the tax on new car purchases from dealerships?

Tax on new car deals is 13% HST added to the full MSRP at the point of sale, with dealers handling remittance. Trade-ins deduct from the base, slashing your tax – e.g., $40,000 car minus $10,000 trade-in means tax on $30,000 only.

Does sales tax on cars in Ontario apply to EVs or hybrids?

Sales tax on cars in Ontario hits EVs post-rebates (up to $7,000 federal/provincial), so a $50,000 EV might tax on $43,000. Hybrids follow standard 13% rules with no special breaks unless business exempt.

Can you avoid tax on cars in Ontario with a family gift?

Yes, immediate family gifts (spouse, parent, child) skip the tax on cars in Ontario via a Sworn Statement at ServiceOntario—prove relation to claim it. Non-family transfers still owe full 13%.

How is car sales tax in Ontario calculated on leased vehicles?

Car sales tax in Ontario on leases spreads 13% across monthly payments, not the full cap cost—ideal for cash flow. Early termination may trigger lump-sum reconciliation.

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