Car Sales Tax Across Canada: Who's Paying What & Where

Paying the taxman is especially painful when it comes to major purchases like a car. It can be as high as 15% on the sticker price depending on which province you live in. It can even be as high as 20% if you’re buying a luxury vehicle. That significantly affects your buying power.

But are all provincial taxmen (and women) created equal? Whether you’re paying GST, HST, PST or RST on a motor vehicle purchase, the tax rate is going to vary province to province. So, is it possible to purchase a car in a province with lower taxes and score a deal? Let’s explore this concept and see if it’s a feasible way to avoid paying an inordinate amount of car sales tax. 

Buying a car in another province

Buying a car is not a simple transaction. It’s not like buying a coat in Toronto and wearing it home to Montreal. Vehicles must be registered with government agencies, which makes buying one across provincial borders a little tricky. Naturally, you want to register your car in your home province so that complicates the idea of driving home your new purchase.

Even if you choose not to register it yet, you will need to find transportation to bring your new purchase home. That could be expensive. And if it’s been previously registered in a different province, you will need to transfer the title and registration to your home province. Expect to pay between $80 and $150 for this service. 

Where’s the cheapest provincial sales tax?

GST, PST, HST, RST, QST—there are A LOT of acronyms to know when it comes to paying tax on retail goods in our country. Thankfully, you don't need to know about all of them; just the ones relevant to your province or territory.

The GST (Goods and Services Tax) is a federal tax of 5% and there’s no escaping it, unless you are buying from a private seller. In BC, however, you may not have to pay 5% GST on a private sale, but you will pay up to 5% more in PST than you would at a dealership (see below). PSTs are provincial sales taxes while HST is a harmonized sales tax combining GST and PST. Meanwhile, QST is Quebec’s version of the PST, and RST is Manitoba’s Retail Sales Tax.

So who’s paying the most and who’s paying the least amount of tax when buying a vehicle? Maritimes provinces New Brunswick, Newfoundland and Labrador, Nova Scotia, and PEI all pay an HST of 15%, while Quebec is right up there at 14.975%.

Prov.	Tax	Prov. rate (PST /RST /QST)	Fed rate (GST)	Total (HST)
AB	GST	0%	5%	5%
BC	GST + PST	7% (for vehicle under 55K)	5%	12%
MB	GST + RST	7%	5%	12%
NB	HST	10%	5%	15%
NL	HST	10%	5%	15%
NS	HST	10%	5%	15%
ON	HST	8%	5%	13%
PEI	HST	10%	5%	15%
QC	GST + QST	9.975%	5%	14.975%
SK	GST + PST	6%	5%	11%

Tax on new & used vehicles purchased at a dealership.

On the other side of the tax spectrum, Alberta is the clear winner with zero provincial sales tax. Some have called this the “Alberta Advantage,” and you can see why when surveying other provinces. Next door neighbours Saskatchewan has the second lowest tax rate at 11% when combined with the GST. BC—and Manitoba, which just lowered its PST by one percentage point on Canada Day—follows at 12%, then Ontario with 13%. BC—and Manitoba, which lowered its PST by one percentage point in 2019—follows at 12%, then Ontario with 13%. The table directly below outlines how much tax you'll pay when you buy a vehicle in a private sale.

Prov.	Tax	Prov. rate (PST /RST /QST)	Fed rate (GST)	Total (HST)
AB	-	0%	0%	0%
BC	PST	12% (for a vehicle under $125K)	0%	12%
MB	RST	7%	0%	7%
NB	PST	15%	0%	15%
NL	PST	15%	0%	15%
NS	PST	15%	0%	15%
ON	RST	13%	0%	13%
PEI	PST	15%	0%	15%
QC	QST	9.975%	0%	9.975%
SK	PST	6% (for a vehicle over $5K)	0%	6%

Tax on used vehicles purchased through a private sale.

The curious case of British Columbia

Car sales tax in BC gets a little trickier when you compare private sales with dealership sales. With a privately sold vehicle, you may not pay the 5% GST that you would pay at the dealership, but you’ll pay more in PST (12%) for any vehicle costing under $125,000. At a dealership, you'll only pay 7% PST on a vehicle under $55,000 to make up for the added 5% GST.

BC Luxury Car Tax

BC's tax on luxury vehicles has been a hot topic of debate recently. In Canada's westernmost province, vehicles priced $125,000 or higher are subject to a higher tax bracket. If you plan on buying something like an Aston Martin, Lamborghini, or Ferrari, remember that any higher tax rate applies to the total amount, not just the incremental amount. Supposing you buy a luxury car costing $200,000, you’ll pay at least 20% in taxes whether you purchase in a private sale or dealership. That’s $40,000!

Dealership Sale Price (PST)	Private Sale Price (PST)
Under $55,000 (7%)	Under $124,999 (12%)
$55,000 - $55,999 (8%)
$56,000 - 56,999 (9%)
$57,000 - $124,999 (10%)
$125,000 - $149,999: (15%)	$125,000 - $149,999 (15%)
Over $150,000: (20%)	Over $150,000 (20%)

Federal Luxury Tax will add extra cost

Fancy rides are set to get a little more expensive when the federal government’s new Luxury Tax kicks in September 2022. The Luxury Tax will be applied before GST/HST on vehicles valued at over $100,000. It will be calculated at the lesser of 20% of the value above the $100,000 price thresholds or 10 per cent of the full value of the luxury vehicle. 

An example would be a car priced at $106,000. The Luxury Tax would be either 10% of full value ($10,600) or 20% of amount over threshold ($1,200). In this instance, the Luxury Tax would be the lesser amount at $1,200.

Is it worth it to cross-border shop in Alberta for cars? 

Now that we’ve surveyed the retail tax landscape, and shown the relative parity between provincial tax systems, it’s pretty clear there’s only one scenario in which cross-border shopping is even worth considering. If you’re a resident of BC, or even Saskatchewan, you’re looking at Alberta and it's no-PST as a possible way to save.

If only it was as easy as buying a car off the dealer lot in Alberta and driving it home to BC, a lot more people would do it. However, as we mentioned, your car needs to be registered and insured before it can be driven. So, in the case of a BC resident buying a car in Alberta, you will have to register and insure it in Alberta before you can drive it home, and then you will have to do it all over again in your home province, plus it likely will need to pass BC-designated inspection. On top of that, according to ICBC Provincial PST must be paid at the time of registration in BC unless you qualify for an exemption (gifts, new residents, etc.).

Clearly the BC government has made substantial efforts to safeguard against drivers buying their cars from a tax-free neighbouring province. We can assume that would mean a substantial hit to the BC economy.

How to calculate sales tax on a used car

A common misconception about buying a used vehicle is that you don’t have to pay tax on the purchase. Picture a scenario where you find a car listed privately on a website and you agree to buy that car. You pay the asking price and no tax is factored into the sale. 

Because the seller is not a GST/HST/PST registrant – such as a dealership that claims it as part of their business taxes – they are not required to collect the tax from you. However, once you register your vehicle, your provincial government could collect the tax from you on the sale.

It differs by province, with Alberta once again exempt from any tax on private sales, while provinces like Ontario, BC, Manitoba and Saskatchewan each collect some form of vehicle sales tax.

The trade-in tax savings advantage

An easy way to save money on tax when buying a car is to take advantage of trade-in benefits. When you trade in your car, the amount of the new purchase is reduced by the value of your trade in, and then you only need to pay tax on that reduced amount of the sale. It can also reduce your payments in the long term if you are financing. 

Here’s a few examples:

Alberta

• You buy a new truck in Alberta for $40,000.
• You trade in your old truck for $10,000. 
• You only need to pay the 5% GST on the $30,000 difference. 
• Your tax bill would be $1,500 instead of $2,000. 
• Your tax savings is $500. 

British Columbia

• A BC resident purchases a sporty SUV for $35,000.
• They trade in their old SUV for $10,000.
• They pay 12% on $25,000 ($3,000) as opposed to 12% on $35,000 ($4,200). 
• That’s a substantial savings of $1,200. 
• Think about it this way: the value of your trade-in vehicle went from $10,000 to $11,200!

This is why many people prefer trade-ins to selling privately. On average, you get more for your vehicle when you sell it yourself. But that process can require mechanical repairs, refurbishment, detailing and the time spent listing and meeting with prospective buyers. As you can see with trade-in tax savings, you’re getting closer to the price you would get by selling privately.

Get a real offer for your car today

If you’re thinking about upgrading your car and don’t have time to sell your old vehicle yourself, why not take advantage of the tax savings to be made when you trade it in with Canada Drives? Go to our online valuation tool to see how much you could get for your trade-in vehicle today. We'll even come and pick it up when we drop off your new car.