Are you buying a used vehicle? Learn what to expect before you make an offer so you can properly budget for taxes.
Find out if you are exempt from paying tax, or if you may pay less with an appraisal.
To explain the tax at each type of sale, our content team reviewed Ontario’s specified-vehicle Retail Sales Tax bulletin, Ontario’s used-vehicle buying and selling guide, CRA’s GST/HST guidance for motor vehicles, and CRA’s trade-in rules.
How Much Tax Do You Pay On A Used Vehicle In Ontario?
| How you buy | Tax path | Where and when you pay | Starting tax base |
|---|---|---|---|
| GST/HST- registered dealer | HST | Tax is normally collected by the dealer and will appear on the bill of sale. | The dealer’s taxable selling price, subject to CRA rules |
| Private seller who is not a GST/HST registrant | 13% Ontario RST, unless an exemption applies | You normally pay at ServiceOntario when ownership is registered | Fair market value under Ontario’s specified-vehicle rules |
Before calculating the amount due, confirm the seller type because different tax rules apply, and check Ontario’s specified-vehicle bulletin.
Though both are taxed at 13%, Harmonized Sales Tax (HST) and Retail Sales Tax are calculated and assessed differently.
How Ontario Calculates Tax On A Used Vehicle
Ontario usually taxes a used car, van, or truck with an empty weight of 2,200 kg or less, as shown on the vehicle permit, purchased from a private individual based on the greater of the:
Purchase price or Red Book value (an industry-standard vehicle valuation guide).
Ontario will use the purchase price to assess your vehicle if its Canadian Red Book value is less than $1,000. These amounts do not account for condition, options, or mileage adjustments.
Read More: Check the Used Vehicle Information Package Before Calculating Ontario Tax
Example 1: Purchase Price Is Higher
If you buy a used car for $20,000 but the car’s Red Book wholesale value is $15,000, you’ll pay tax on the purchase price because it’s higher than the Red Book wholesale value. At the current tax rate of 13%, that would be $2,600.
This example is based on RST on a private sale. If you buy from a dealer, the rules are different, and tax is based on your HST invoice, not wholesale value.
Appraising Your Vehicle
If a vehicle is excessively used or severely damaged, an appraisal can reduce the retail sales tax you owe. You may appraise a car, van, or light truck weighing 2,200 kg or less if its Red Book value is at least $1,000.
If you have bought a vehicle that qualifies for an appraisal, you may be entitled to a tax refund if you were charged tax on its Red Book value. Have it appraised within 60 days of purchase.
An OMVIC-registered motor vehicle dealer or an independent appraiser authorized by Ontario’s Ministry of Finance must complete the appraisal.
If a vehicle’s purchase price and appraised value are both below its Red Book value, Ontario taxes it at the higher of the two.
Example 2: A Qualifying Appraisal Changes The Base
The Red Book value is $20,000, and the qualifying appraisal is $13,000. You pay $15,000. Ontario uses the greater of your purchase price ($15,000) and the qualifying appraisal ($13,000), which is $15,000 in this example. The RST is $1,950.
Four Used-Vehicle Tax Calculations Buyers Often Confuse
| Transaction | Taxable amount in this example | Tax at 13% |
|---|---|---|
| Private car: paid $20,000, Red Book $15,000 | $20,000 | $2,600 RST |
| Private car: paid $15,000, Red Book $20,000, qualifying appraisal $13,000 | $15,000 | $1,950 RST |
| Ontario dealer: price $20,000, no trade-in | $20,000 | $2,600 HST |
| Dealer: price $25,000, $10,000 personal-use trade-in allowance | $15,000 under the CRA trade-in rule | $1,950 HST |
The last row assumes the customer is not required to collect tax on the trade-in. A business registrant may treat a trade-in as a separate taxable transaction. Request the dealer’s written calculation if the vehicle is used in a business.
Special Used-Vehicle Tax Rules
Private Trade-Ins Do Not Reduce RST
Where two private owners exchange vehicles and payment is also involved, Ontario will not reduce the RST base by the trade-in amount on either vehicle.
Vehicles That Are 20 Years Old Or Older
If you have bought an automobile, van or truck privately in this weight class that is 20 years old or older, Ontario will use the higher of the purchase price, appraised value or the replacement value for insurance purposes. Bring a bill of sale and an appraisal or insurance document showing the replacement value.
Other Specified Vehicles
Motorcycles, motor homes, trailers, boats and other specified vehicles are not necessarily compared to similar vehicles in the Red Book as are light vehicles. For these vehicles, fair market value generally means the purchase price.
An Out-Of-Province Private Purchase
In most cases where a private specified vehicle is purchased in another province of Canada and brought into Ontario, a 13% Ontario RST will be charged on the purchase price. First, verify the other province’s rules and confirm the seller’s tax status (private individual or dealer). If a dealer is involved, refer to GST/HST information.
Read More: Read the Ontario Guide to Buying an Out-of-Province Car
Tax Exemptions: When You Don’t Have To Pay RST
| Possible exemption | What to confirm before relying on it |
|---|---|
| Gift from qualifying family | In Ontario, there is a list of family relationships which qualify as eligible for a tax exemption. All of the conditions must be met, a sworn form must be completed and the vehicle must not have been transferred using the family-gift exemption in the last 12 months. |
| Estate transfer | You are exempt from RST if you have the will, estate-trustee or other estate documents as per Ontario’s requirements. |
| Eligible First Nations transfer | In some circumstances, you don’t have to pay retail sales tax (RST). To be exempt from paying tax, both the purchaser and the transaction have to meet the eligibility requirements in this bulletin, as well as certain identification requirements. |
| Settler’s effects | You meet the residence, ownership, timing and prior-tax conditions; an old plate alone is not enough |
| Foreign representative or another listed exemption | The buyer falls within the exact category and brings the required authorization |
To claim an exemption, you must be entitled to it based on the facts and provide any evidence Ontario asks for. Paying a lower price or saying you are getting it as a gift is not enough. Check the current Ontario bulletin for exemptions and documentation requirements.