Do you need to pay sales tax on a used car in Ontario?
Yes, under most circumstances, you need to pay sales tax if you’re purchasing a previously-owned vehicle in Ontario.
If you’ve been asking yourself, “how much tax do you pay on a used car in Ontario?” you can expect to pay 13% in sales tax.
However, the type of sales tax that you need to pay depends on whether you purchased the vehicle from a GST/HST registrant (i.e. a car dealership) or a private seller.
Do you pay tax on used car sales from a dealership in Ontario?
Yes, you’ll need to pay 13% HST (harmonized sales tax) when you purchase a used vehicle from a used car dealership in Ontario. As a GST/HST registrant, the car dealership needs to charge a 13% sales tax on all of their sales, which is then given to the CRA (Canada Revenue Agency).
Do you pay tax on private car sales in Ontario?
Once again, yes, you need to pay a 13% sales tax when you purchase a used vehicle, even if you bought the car from a private seller. However, the type of sales tax that you need to pay differs slightly from the sales tax that you pay when you buy a used car from a dealership.
Instead of paying the HST at the time of the purchase, you pay 13% RST (retail sales tax) when you register your vehicle.
Buyers should note that RST is calculated differently from HST. Unlike HST, which is based on the sale price of the item, RST is based on either the vehicle purchase price or the wholesale price (as per the Canada Red Book).
If the vehicle purchase price is greater than the wholesale price, then that amount will be used to calculate the RST (and vice versa). However, you will need to pay RST on the purchase price if the vehicle is valued at less than $1,000 (as per the Canada Red Book).
Lastly, if you purchase a used car that is deemed “severely damaged” or “excessively used” by the Ministry of Transportation but it’s valued at $1,000 (or more), then you can get the vehicle appraised. You then pay RST on the appraisal value or the purchase price (whichever amount is higher). However, this only applies if the appraisal value and the purchase price are less than the Canada Red Book value.
Do you pay sales tax on used antique cars in Ontario?
Yes, you need to cover the Ontario tax on used cars, even if the vehicle is considered an “antique” (20 years old or older).
If you’re planning on purchasing a used antique car, you need to pay 13% RST when you register the vehicle. The RST is based on the purchase price, the vehicle’s appraisal value or the insurance replacement value (whichever amount is higher).
Be sure to keep this in mind if you’re thinking about purchasing a classic car in Ontario.
Bonus tip — Learn how to insure a classic vehicle in Canada
Does everyone in Ontario have to pay sales tax on used cars?
No, there are a handful of situations in which you may not need to pay the Ontario sales tax on used cars. You don’t need to pay sales tax on your used car under the following circumstances:
- Status Indians do not need to pay sales tax when they purchase a used car from a private seller in Ontario
- You may not need to pay RST when you register your vehicle if you’re moving from a different province
- Foreign diplomats (who are moving to Canada and are representing their countries) do not have to pay sales tax when they purchase a used car in Ontario
- You do not need to pay sales tax if you were given a used vehicle as a gift
- You do not need to pay sales tax if a family member, friend, etc., left you a used vehicle in their will
Do you need to pay sales tax on car insurance in Ontario?
No, auto insurance is one of the few things that is exempt from HST in Ontario. This is due to the fact that auto insurance is considered to be a “financial service”. In Ontario, you don’t need to pay HST on financial services, which means that it doesn’t apply to car insurance.
That being said, there are a handful of situations where you may need to pay RST on your auto insurance. Feel free to check out our previous blog or reach out to your Surex insurance advisor for more information.
