Ontario used-car tax: dealer, private, and the rule nobody warns you about

There are two ways to buy a used car in Ontario, and they are taxed differently. Not at different rates. On different numbers. It is 13% either way, and nearly everything that goes wrong here goes wrong because people assume the rate is the whole story.

Buy from a registered dealer and you pay 13% HST on the advertised price. The dealer collects it, it shows on the bill of sale, and there is nothing left to work out. Ontario’s all-in price advertising rules mean that advertised price already has to contain every fee the dealer intends to charge you, so the tax lands on a number you could see in the listing before you walked in.

Buy privately and nobody collects anything at the sale. You hand over the money, you take the ownership, and then you go to ServiceOntario to register the car. The tax appears at that counter, and it is retail sales tax rather than HST. Same 13%. Different base.

The greater-of rule

Ontario does not charge private-sale tax on what you paid. It charges on the greater of what you paid or the Canadian Red Book average wholesale value for that vehicle. Whichever number is bigger is the number you are taxed on.

So you find a good car from somebody who wants it gone this weekend, and you agree on $5,000. If the book puts that car at $9,000, the counter charges you 13% of $9,000.

The rule exists to stop a $20,000 car being written up as a $500 favour between friends, and at that job it works. It also means a genuinely cheap deal costs you tax on a price you never paid. There is nothing to argue at the counter. The number to look up is the book value, and the time to look it up is before you agree on a price rather than after.

What else you pay, and one thing you no longer do

The tax is the large line. Everything else is smaller than most people budget for, and one of the items everybody still budgets for is free.

• Plate sticker renewal costs nothing. Ontario removed the fee in 2022 for passenger vehicles, light trucks, motorcycles and mopeds. You still renew every two years, and you still need valid insurance and no unpaid fines or tolls, but there is no cheque. Any calculator still charging you a sticker line is out of date.
• A used vehicle information package costs $20 and a private seller has to give you one. Set fines for failing to provide or deliver it rose to $140 in January 2026, which tells you how seriously it is taken. Read it. It shows the lien status, and a lien is the one problem a cheap car can hand you that money cannot fix.
• A private-sale transfer typically runs $60 to $120, covering the package and the plate and permit work at the counter.
• A safety standards certificate is required to plate a used car and only a licensed motor vehicle inspection station can issue one. It is priced at shop labour rates and we do not publish a figure for it, because the research behind this site does not have one. Phone the shop and ask before you book.

A dealer sale adds one small thing a private sale does not. The Ontario tire stewardship fee, $20 to $30 per vehicle, is charged on top of the advertised price. It is the exception rather than the pattern: almost every other dealer fee has to be inside the price already.

Gifts inside a family

A vehicle given between certain family members is exempt from the retail sales tax, with a sworn statement at the counter. It is a real exemption and it is used often. If a parent or a spouse is handing you a car, ask about the exemption before you write it up as a sale for a dollar, because a sale for a dollar is exactly what the greater-of rule was built to catch.

What to do with this

Two habits cover most of it. Before you agree on a private price, look up what the book says the car is worth, because that is the number you will be taxed on. And when you weigh a dealer car against a private one, compare the drive-away totals rather than the asking prices.

A dealer car at $12,000 and a private car at $10,500 are much closer than they look once the book value, the package and the certificate are in the total. Sometimes the dealer car is the cheaper one. It is worth knowing which before you spend a Saturday on it.