If you’re looking into purchasing a vehicle in BC, it’s important to factor in the car sales tax in your pricing. Depending on whether you have to pay GST, PST, or both, this cost can add up considerably. Depending on the cost of the vehicle, your sales tax could end up being thousands.

Cost of Tax on New Cars in BC

When it comes to the car tax required to be paid on vehicles, how old or new the vehicle is doesn’t matter quite as much as where you purchase the vehicle from. In BC, the type of taxes you pay on a vehicle you purchase is dependent on whether the purchase is a private sale or you purchase the vehicle from a GST registrant (usually a dealership). 

In BC, when you purchase a vehicle from a GST registrant, you’re required to pay both GST and PST. GST is the federal tax that’s known as the Goods and Services Tax, while PST is the provincial sales tax. When you purchase a vehicle in a private sale, you only end up paying the PST when you register the vehicle in your name with ICBC (Insurance Corporation of British Columbia). That said, PST charged can be higher through a private sale than it is through a dealership. 

Cost of Tax on Cars Purchased Online

With technology becoming more and more popular, people now purchase vehicles online or through an online retailer. That said, the amount you pay in provincial sales tax is based on whether you’re buying a car from an online dealership or not. Whether you’re purchasing a new car or a used car from a dealership, online or in person, you pay sales tax. However, you pay tax based on the price of the car, not the vehicle type, which is different from paying taxes on vehicles purchased through a private sale. 

Cost of Tax for Private Sales vs Dealership in BC

The rates of GST and PST that you have to pay vary based on the price of the vehicle. That said, the rates vary whether you purchase in a private sale or through a GST registrant. Through a dealership, PST rates range between 7% and 20%, while the range for private sales is 12% to 20%.

The rate you pay on PST when purchasing a vehicle at a dealership depends on the overall cost of the vehicle. This doesn’t matter whether the vehicle is new or used, but it must be considered a passenger vehicle. Keep in mind, though, that while the PST on a vehicle fluctuates, the GST rate is standard for all vehicles and is only 5%. However, if you have a trade-in as well when you’re purchasing, you only pay PST and GST tax on the difference between the full value of the vehicle and the trade-in value, meaning that you would end up paying less PST. 

When it comes to private sales in Canada, you make the PST payment when you register the vehicle with ICBC. However, how the rate is calculated is a little bit different. The amount you pay in PST is based on either the purchase price of the vehicle or the wholesale value; it just depends on which price is greater. This is a fairly new change, though, and its purpose is to prevent buyers from putting in a low purchase price to avoid paying PST tax.

Taxes Based on Car Type in BC

While there are some variations to the PST cost depending on the vehicle you purchased, none of them are based on the brand or make of the vehicle. The distinguishing factors that determine the PST rate on the vehicle are:

• If it’s a zero-emission vehicle
• If it’s a used or new ZEV
• If it’s a passenger vehicle or not

If the vehicle is not a passenger vehicle and it’s not ZEV, then the cost of PST in private sale is 12% of the purchase price, no matter what the purchase price was. However, if the non-passenger, non-ZEV vehicle was purchased from a GST registrant, imported or leased, then the PST price drops down to 7%. 

If the vehicle is a ZEV but it’s used, then the rates we listed apply for both private and dealership sales. However, the vehicle will have to meet some stipulations in order to qualify. This only applies to passenger vehicle ZEVs, though. Non-passenger ZEVs pay 12% in a private sale and 7% from a GST registrant. The cost of the vehicle isn’t a factor in this case. 

BC Luxury Car Tax

When you hear the term luxury car tax, it may seem like this is an added tax for luxury vehicles. The term is actually slightly deceiving. Luxury tax is the term used to describe an increase in the cost of PST based on the price of the vehicle, so how much tax you pay is based on the cost of the vehicle. The more expensive the vehicle is, the higher your tax rate. 

When you purchase a vehicle from a dealership, if the cost of your vehicle is under $55,000, then the PST rate is only 7%. As the price increases, so does the PST rate. If you purchase a vehicle and the cost is between $57,000 and $124,999, then the PST is 10%. Not only do you pay more because the price is higher, but the PST rate is higher, too. On top of that, you have to pay the 5% GST since you’re purchasing the vehicle from a GST regulator. This brings your total tax percentage to 15%. On a $70,000 vehicle, the total tax bill is $10,500, not to mention the interest rate on the amount if you require a loan as well. 

When you’re considering purchasing a vehicle, whether it’s new or used, the rate of tax is something to consider. It’s part of the budget, and as you get into the expensive luxury cars, the cost increases even more. 

How to Avoid Luxury Tax

In British Columbia, the luxury tax only applies to vehicles that cost over $55,000. The cost of tax on vehicles under $55,000 is 7% PST, 5% GST on vehicles from a dealership and 12% on vehicles purchased through a private sale. In order to avoid the luxury tax, you’d need to purchase a vehicle under $55,000. Other than that, there’s really no way to avoid it.

Avoiding Car Tax in BC Altogether

Unfortunately, in BC, it’s not always possible to avoid taxes when purchasing a vehicle. When it comes to new vehicles, there aren’t really any exemptions. That said, when it comes to used vehicles, certain situations could provide you with a tax exemption. Let’s take a look. 

• Being a New Resident to BC:  If you’re new to BC and moved from out of province, you could qualify for a PST exemption on your vehicle that was previously registered in another province. In order to qualify, your vehicle must be used for personal use only, and you had to have owned the vehicle for at least a month before you moved to the province. The vehicle must also arrive within one year of your move. 
• Receiving Gifts and Inheritance: Vehicles received due to the death of a relative or a gift from a family member may qualify for an exemption from PST since no money changed hands in order for you to receive the vehicle. 
• Purchasing Used Zero Emission Vehicles: From February 2022 until February 2027, you can purchase a used vehicle without having to pay any PST. Used ZEVs purchased privately must have at least $6,000 km on them in order to be eligible. 

Another way you can avoid or reduce the amount of PST that you pay on your vehicle is by getting a vehicle appraisal. Independent motor vehicle appraisers can assess the vehicle's value and give you an accurate determination of what it’s worth. Since the tax you pay is based on whether the purchase price or vehicle's fair market value is higher, getting an accurate appraisal can greatly reduce the cost of PST and potentially even lower your PST rate. 

Tax on Cars in Canada

We’ve gone over the cost of tax on new and used cars in BC, but if you’re choosing to purchase a vehicle in a different province, then the tax costs will vary. Each province has their own PST rates and regulations over how these rates are charged. That said, no matter where you purchase a vehicle in Canada, the GST rate of 5% is charged on vehicles purchased from GST regulators, and no GST is charged on vehicles that are purchased through private sales. However, some provinces don’t charge GST/PST separately, they have the Harmonized Sales Tax, also referred to as HST. 

Differences Between Taxes in BC and the Rest of Canada

When you look at the chart above showing the tax rates for the rest of Canada, one thing that’s pretty noticeable is that BC is the only province where the tax rate changes based on the cost of the vehicle. Other provinces have a flat rate. The only exception to this is Saskatchewan, where they don’t charge tax on private sales that cost under $5,000. 

Another thing that’s very noticeable is the Alberta provincial government doesn’t charge any taxes on vehicle purchases at all. You only pay 5% GST when you purchase the vehicle from a dealership. Other than that, for expensive vehicles, BC has the highest tax rate in all of Canada because of its luxury car tax. 

Final Thoughts 

When it comes to purchasing a vehicle in BC, it’s important to consider the cost of taxes. These taxes can add up fast and eat up your budget. While there are some situations and circumstances where you can save on the PST, generally, when you purchase a vehicle, you must pay the tax. This means that you need to pay close attention to how much the cost of your vehicle is. 

Unlike other provinces in Canada, BC charges a luxury tax. This means that the price of your vehicle dictates the cost of the PST. However, there are some other things that change the rate of your PST. Where you purchase the vehicle and whether it’s considered to be a zero-emission vehicle make a difference. 

While purchasing a vehicle in Canada can be costly, it’s important to do your research before you buy. You want to make sure that you calculate sales tax into your budget as well. This way, you know what you can reasonably afford and stick to your budget once you start looking.