Learn how much tax will you pay so you know how much you can spend on your new car!
Not everyone wants to buy a new car. Sometimes the newest model of the vehicle you need just doesn’t fit your budget. Or maybe you just prefer the look and features of an older model. Whether you’re looking for a good reliable car for a growing family or a dependable pick-up truck for your home-based business, buying a used vehicle could be the answer.
Used vehicles buyers face a few different challenges than people who buy new. One key area is taxes. How much tax do you pay on a used car, anyways? Is it different in each province? How do taxes on used cars compare across the country?
Here’s what you should know about how much tax you’ll pay on a used car in Canada.
How to Lower the Taxes When You Buy a Used Car in Canada
Are you looking for ways to reduce the taxes on your used car purchase? One way to save money on taxes when getting a car is to trade in your own used vehicle.
When you trade your car in, the amount of your new car purchase gets reduced by the value of your vehicle trade-in. Then you’ll only need to pay tax on that lower sale amount. Even better? It can help lower your payments in the long term if you’re financing your vehicle purchase.
Let’s say you buy a used truck for $50,000 in Alberta, where used vehicle buyers pay the 5 percent federal GST. You decide to trade in your old truck instead of coming up with a cash down payment. Your truck gets valued at $10,000.
Good news – you’ll only pay the 5 percent GST on the $40,000 difference between the price of the truck you’re buying and the value of your old truck. So you’ll pay $2,000 instead of $2,500. And instead of paying $50,000 for a new-to-you used truck, you’ll pay (or finance) just $42,500.
How Much Tax Do You Pay if You Buy a Used Car From a Family Member?
Are you buying a car from a family member, or receiving a used car from a parent or child as a gift? If so, you might pay very little (or no) taxes. Check your provincial website for more details.
How Much Tax Do You Pay on a Used Car?
The total amount of tax you pay when you buy a used car depends on the combination of the provincial tax and federal tax. The federal tax on used cars is just the GST. So regardless of where you are in Canada, you’ll pay at least 5 percent federal tax. However, provincial taxes on used cars vary.
How Much Provincial Tax Do You Pay on a Used Car in Canada?
One of the key things to know about paying taxes when you buy a used car in Canada is that the rules differ from province to province. Additionally, the calculation of the taxes may differ within the province based on things like the relationship between the buyer and seller, how the sale takes place and even the age of the vehicle.
Here’s an overview of how much provincial tax you could expect to pay when you buy a used car, province by province.
How Much Tax do You Pay on a Used Car in Ontario?
In Ontario, used car buyers don’t pay sales tax to the seller. However, most of the time, used car buyers will pay 13 percent RST. The amount is based on the purchase price or the vehicle’s wholesale value (whichever is greater).
Wondering where to find the wholesale value of the vehicle? Check out the Canadian Red Book. It’s an industry-standard used by car dealers, insurance companies and other provincial governments and it includes the wholesale and retail value of used vehicles.
If the used vehicle you’re buying in Ontario is 20 years old or older, you’ll need an appraisal completed by a professional.
If you’re buying a used vehicle from a close family member, receiving it as a gift or if you’re a Status Indian in Ontario, you don’t pay sales tax. For more information visit the Province of Ontario website.
How Much Tax do You Pay on a Used Car in BC?
Buying a used car in British Columbia? If so, you can expect to pay between 12 and 20 percent in sales tax, depending on the car’s value and where you buy it from.
If you buy a used car from a dealer in BC, you’ll pay the federal GST of 5 percent.
Buying privately? GST doesn’t apply to used vehicles sold privately but expect to pay 12 percent PST on cars sold for up to $124,999. You’ll pay 15 percent on a car or truck sold between $125,000 and $149,999 and 20 percent if you pay more than $150,000.
In BC, you’ll pay the PST amount owing when you register the car with ICBC, the province’s motor vehicle registration and insurance body. The PST gets calculated based on the sales price of vehicles bought from dealerships.
In that case, it starts at seven percent for vehicles costing less than $55,000 and goes up to eight percent if the price is between $55,000 and $55,999. From there it increases to nine percent on a price between $56,000 and $56,999, 10 percent on $57,000–$124,999, 15 percent on $125,000–$149,999 and 20 percent once the price gets to $150,000.
You’ll pay this PST on top of the federal GST. Learn more at BC Provincial Sales Tax Bulletin.
How Much Tax do You Pay on a Used Car in Alberta?
Alberta is one of four provinces/territories in Canada that doesn’t collect a provincial sales tax. So, as in other provinces, you’ll only pay the five percent GST if you buy your vehicle from a dealership. Private used vehicle sales are not taxed.
How Much Tax do You Pay on a Used Car in Saskatchewan?
If you’re looking to buy an inexpensive used vehicle in Saskatchewan, we have good news. Used vehicles purchased privately for personal or farm use with a purchase price of $5,000 or less are exempt from the six percent PST. That means you don’t have to pay any provincial sales tax. However, for vehicles with a purchase price greater than $5,000, the buyer must pay PST on the full purchase price.
Interestingly, while the six percent PST gets calculated on the purchase price, the $5,000 private-sale tax exemption gets calculated on Canadian Red Book values.
And as in other non-HST provinces, if you buy a vehicle from a dealer you’ll pay the GST for a total of 11 percent tax on top of the cost of the vehicle. Visit Saskatchewan New & Used Vehicles for more information.
How Much Tax do You Pay on a Used Car in Manitoba?
Manitoba has a seven percent provincial retail sales tax (RST). It applies to all used car purchases.
If you buy a used car in Manitoba, you’ll either pay it to the dealer or if you buy privately, to the Autopac agent, the province’s motor vehicle insurer. And don’t forget to add the five percent GST when buying from a dealer. You’ll find more information at Manitoba Vehicle Taxation.
How Much Tax do You Pay on a Used Car in Quebec?
Looking to buy a used vehicle in Quebec? If so, get ready to pay the 9.975 percent Quebec Sales Tax (QST) as well as the five percent GST to all used vehicles bought from dealers. However, if you buy from a private seller, you’ll only pay the QST.
It’s important for used car purchasers in Quebec to understand that these taxes get calculated differently. The dealer charges GST based on the purchase price. However, the QST is set on the amount that’s higher, either the sale price or the vehicle’s estimated value. Learn more at the Revenu Quebec website.
How Much Tax do You Pay on a Used Car in Nova Scotia?
Looking to buy a used car in Nova Scotia? If so, you should know that private sale vehicles without a valid tax exemption get taxed at the rate of 15 percent. This is the Nova Scotia Sales Tax (NSST) and it’s based on whichever is greater: the purchase price or Canadian Red Book value when the vehicle gets registered.
Some of the “valid tax exemption” situations in Nova Scotia include:
- Transferring a used vehicle as a gift between immediate family members
- A vehicle bought by a Status Indian who lives on a reserve as long as possession of the vehicle happens on the Reserve
- A vehicle bought by a diplomat
- A vehicle brought into Nova Scotia as part of Settlers Effects
How Much Tax do You Pay on a Used Car in Newfoundland, New Brunswick, or PEI?
How much tax do you pay on a used car in the Maritime provinces? Given their small sizes and close proximity to each other, it comes as no surprise that they share the same tax rules and rates. Just like Nova Scotia, if you buy a used car in Newfoundland, New Brunswick or PEI you’ll pay a 15 percent Harmonized Sales Tax Rate on any used vehicle bought from a dealership.
If you buy a used vehicle privately, you still pay 15 percent. However, you pay it as a provincial retail sales tax. In New Brunswick, this is called Provincial Vehicle Tax. You’ll pay this tax when you register the vehicle in your name. The tax gets calculated based on either the purchase price or the average wholesale value.
Buying a used car can be a good way to get the vehicle your family needs while staying within your budget. If you’re ready for a simple, fast car-buying experience, fill out an online application today and one of our representatives will reach out to you shortly. You could be driving a new-to-you vehicle in just a few days.