The Ontario car sales tax is 13 percent on almost every vehicle purchase, but the type of tax and how you pay it depend on who you buy from. Dealership purchases attract Harmonized Sales Tax (HST), which the dealer collects and remits. Private sales attract Retail Sales Tax (RST), which you pay directly at ServiceOntario when you register the vehicle. The rate is the same in both cases; the mechanics, the base the tax is calculated on, and the available reductions are not.
Buying From a Dealership
At a registered Ontario dealership, you pay 13 percent HST on the negotiated purchase price. The rate combines the 5 percent federal GST with the 8 percent Ontario provincial component.1Canada Revenue Agency. GST/HST Calculator (and Rates) On a $35,000 vehicle, that’s $4,550 in tax.
The dealer collects the HST, remits it to the Canada Revenue Agency, and shows it on your bill of sale. You don’t file anything on your own. The tax is usually rolled into your financing or paid at closing, and the same rules apply whether the vehicle is new or used.
Trade-Ins Lower the Taxable Amount
Trading in a vehicle at a dealership reduces the amount HST is calculated on. Ontario subtracts your trade-in value from the purchase price before the tax is applied. Buy a $40,000 car, receive $15,000 for your trade-in, and you pay 13 percent on $25,000 rather than the full sticker. That’s $3,250 instead of $5,200, a saving of $1,950.
The credit only works at a registered dealership. There is no equivalent mechanism in a private sale. Make sure the trade-in value is written clearly on your purchase agreement, since that is the figure the dealer reports.
Buying From a Private Seller
A private sale doesn’t save you the tax. Ontario charges 13 percent RST on private vehicle transfers, and the buyer pays it directly at a ServiceOntario centre when transferring ownership.2Ontario.ca. Specified Vehicles – Retail Sales Tax You can’t complete the transfer without paying.
The tax isn’t necessarily calculated on what you actually paid. For cars, vans, and trucks weighing 2,200 kilograms or less, the Ministry of Finance charges RST on the higher of the purchase price or the wholesale value listed in the Canadian Red Book. If the Red Book says the vehicle is worth $12,000 but you paid $8,000, you owe tax on $12,000. The one exception is when the Red Book value is below $1,000, in which case the purchase price is used.2Ontario.ca. Specified Vehicles – Retail Sales Tax
Getting an Appraisal for a Vehicle Worth Less Than the Red Book Value
If the car is in rough condition and genuinely worth less than its Red Book value, an appraisal can lower your tax bill. Both the purchase price and the appraised value must fall below the Red Book value for this to apply. When they do, RST is charged on whichever of those two figures is higher.2Ontario.ca. Specified Vehicles – Retail Sales Tax
The appraisal has to come from a licensed motor vehicle dealer registered with the Ontario Motor Vehicle Industry Council (OMVIC) or an independent appraiser holding a number issued by the Ministry of Finance. If you already paid RST on the Red Book value at registration, you can claim a refund by getting a qualifying appraisal within 60 days of purchase.2Ontario.ca. Specified Vehicles – Retail Sales Tax
Penalties for Under-Reporting the Price
Writing a lower price on the bill of sale to reduce the tax is a common temptation and a bad idea. The Ministry of Finance audits these transactions. If you understate the fair value, the penalty equals the RST you underpaid, with a minimum of $50 and a maximum of $2,500 on top of the tax itself.3Government of Ontario. Penalties – Retail Sales Tax
Where the Ministry finds neglect or deliberate evasion, the penalty rises to the greater of $100 or 25 percent of the RST assessed. Serious cases can lead to charges carrying substantial fines or imprisonment upon conviction.3Government of Ontario. Penalties – Retail Sales Tax
Leasing a Vehicle
Leasing doesn’t let you skip the 13 percent HST. Instead of paying it on the full value up front, you pay it on each monthly payment. For leases longer than three months, the HST rate is tied to the province where the vehicle must be registered.4Canada Revenue Agency. GST/HST and Motor Vehicles Any down payment is taxable too. Trade-ins work the same way as on a purchase: the trade value is subtracted from the taxable leased amount before HST is calculated, so every monthly payment is slightly lower over the life of the lease.
Federal Luxury Tax Above $100,000
New vehicles priced above $100,000 attract a separate federal levy under the Select Luxury Items Tax Act, layered on top of HST.5Canada Revenue Agency. LTN2 Subject Vehicles Under the Select Luxury Items Tax Act It’s calculated two ways, and you owe the lower amount:
- 10 percent of the vehicle’s full taxable amount, or
- 20 percent of the amount over $100,000.
On a $130,000 vehicle, the first calculation gives $13,000 and the second gives $6,000, so the tax owed is $6,000.6Government of Canada. Select Luxury Items Tax Act The two methods produce the same figure at $125,000. Below that, the 20 percent method is cheaper; above it, the 10 percent method is.
The dealer or vendor normally collects the luxury tax at the point of sale and remits it federally. Buyers become directly liable only in unusual situations, such as purchases from the Crown or Indigenous governing bodies.5Canada Revenue Agency. LTN2 Subject Vehicles Under the Select Luxury Items Tax Act The luxury tax is separate from HST, so a $130,000 vehicle would carry $6,000 in luxury tax plus $16,900 in HST.
Exemptions From RST
A few situations let you transfer a vehicle in Ontario without paying RST. Each requires specific documentation at the time of registration.
Gifts Between Family Members
You can transfer a vehicle to a qualifying family member as a gift and pay no RST. The eligible relationships include spouses (including common-law partners), parents and step-parents, children and step-children, grandparents, grandchildren, siblings, half-siblings, and in-laws.7Government of Ontario. Transfer Ownership of a Vehicle to a Family Member
Both parties have to bring a completed Sworn Statement for a Family Gift of a Used Motor Vehicle to a ServiceOntario centre, sworn or affirmed before a notary public or commissioner of oaths. No money or other consideration can change hands. If your brother pays you even $1, the exemption is lost and full RST applies.
Settlers Moving to Ontario
If you’re moving to Ontario from another province, territory, or country, you may bring a vehicle in without paying RST. You must have lived outside Ontario for at least one year before the move, owned the vehicle for at least 30 days before establishing residence, and brought it into Ontario within six months of arriving. Settlers coming from another Canadian province must also show they paid all applicable taxes in their former jurisdiction. Businesses moving vehicles to Ontario don’t qualify.2Ontario.ca. Specified Vehicles – Retail Sales Tax
First Nations Purchases
Status Indians registered under the federal Indian Act are generally exempt from GST/HST on vehicles purchased on a reserve or delivered to a reserve by the vendor or the vendor’s agent.8Canada Revenue Agency. GST/HST and First Nations Peoples When the vehicle is purchased off-reserve but delivered to a reserve, only the 5 percent federal GST applies rather than the full 13 percent HST.
Electric Vehicle Rebates That Offset the Cost
Rebates aren’t a tax exemption, but the federal Electric Vehicle Affordability Program (EVAP) can offset a meaningful share of the tax hit. For vehicles purchased or leased on or after February 16, 2026, the amounts are:
- Battery-electric and fuel cell vehicles: up to $5,000 on a purchase or 48-month lease, scaling down to $1,250 for a 12-month lease.
- Plug-in hybrids: up to $2,500 on a purchase or 48-month lease, scaling down to $625 for a 12-month lease.
To qualify, the final transaction value has to be $50,000 or less. Canadian-made EVs have no price cap. The vehicle must be manufactured in Canada or in a country with a free-trade agreement with Canada.9Transport Canada. Electric Vehicle Affordability Program The incentives are set to decline over the program’s five-year lifespan, so amounts available in later years will be lower.10Transport Canada. Electric Vehicle Affordability Program Vehicle List
Recovering HST on a Business Vehicle
If the vehicle is for business use, you can recover some or all of the HST through input tax credits (ITCs). The amount you can claim depends on how much you use the vehicle for commercial activities versus personal driving.11Canada Revenue Agency. Calculate Input Tax Credits – ITC Eligibility Percentage
- 90 percent or more business use: claim 100 percent of the HST as an ITC.
- Between 10 and 90 percent business use: claim the ITC proportional to actual business use.
- 10 percent or less business use: no ITC.
Separately, on the income-tax side, the capital cost allowance ceiling for Class 10.1 passenger vehicles is $39,000 before tax for vehicles acquired on or after January 1, 2026.12Department of Finance Canada. Government Announces the 2026 Automobile Deduction Limits and Expense Benefit Rates for Businesses Any purchase amount above that ceiling can’t be depreciated, so on an expensive business vehicle the gap between what you pay and $39,000 is a cost you won’t recover.