How is sales tax calculated on a car purchase in Canada?

Sales tax varies by province. Alberta charges only 5% GST. Ontario charges 13% HST. BC charges 12% (5% GST + 7% PST) plus a luxury tax on vehicles over $55,000. Quebec charges about 15% (5% GST + 9.975% QST). Tax is calculated on the purchase price minus trade-in value in most provinces.

What is a typical car loan interest rate in Canada?

In 2025, car loan rates range from 0% (manufacturer promotions) to 4-7% for new cars with good credit, and 5-10% for used vehicles. Rates depend on credit score, vehicle age, loan term, and new vs used.

Is it better to lease or buy a car in Canada?

Leasing offers lower monthly payments but you never build equity. Buying costs more monthly but you own the vehicle. Over 10+ years, buying is typically cheaper. Leasing can be tax-advantageous for self-employed individuals.

What car loan term should I choose?

Financial experts recommend 48-60 months. Most lenders offer up to 84 months, but longer terms mean more interest and the risk of owing more than the car is worth (negative equity).

Car Loan Calculator Canada 2025

Calculate your car loan payment with provincial sales tax, compare lease vs buy, and see how different loan terms affect total cost.

Canadian car loans use monthly compounding (unlike mortgages). Sales tax varies by province: 5% GST (Alberta) to 15% HST (Atlantic). BC adds luxury tax on vehicles over $55K.

Vehicle price

MSRP or negotiated price before tax

Down payment

Cash down at purchase

Interest rate (APR)

New car: 0-7%, used car: 5-10%+

Loan term

months

Common: 36, 48, 60, 72, 84 months

Province

Determines sales tax on the vehicle

Trade-in value

Value of your trade-in vehicle. May reduce taxable amount in some provinces

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Estimates only. Actual payments depend on your credit, dealer fees, and exact tax calculation.

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How to Use This Calculator

Tab "Monthly Payment"

Enter the vehicle price, down payment, trade-in value, interest rate, loan term, and province. The calculator adds provincial sales tax and shows your monthly payment, total interest, and total cost.

Tab "Lease vs Buy"

Enter the vehicle price, monthly lease payment, lease term, residual value, and buy financing details. Compare the total cost of leasing (including buyout) vs buying over the same period.

Tab "Term Comparison"

Enter the vehicle price, down payment, and interest rate. See side-by-side comparison of 36, 48, 60, 72, and 84-month terms showing monthly payment, total interest, and total cost for each.

The Formulas

Monthly car loan payment:
M = P × r × (1 + r)^n / ((1 + r)^n − 1)
where P = amount financed, r = monthly rate, n = total months

Amount financed:
= (Vehicle price − Down payment − Trade-in) × (1 + sales tax rate)

Sales tax by province (2025):
AB: 5% GST | BC: 12% (+ luxury tax over $55K)
SK: 11% | MB: 12% | ON: 13% HST
QC: 14.975% | NB: 15% HST | NS: 15% HST
PE: 15% HST | NL: 15% HST

Total cost of ownership:
Monthly payment × term + down payment + trade-in value lost

Example

Sarah — Buying a $35,000 Car in Ontario, $5,000 Down Payment

Vehicle price$35,000

HST (13%)$3,900

Amount financed$33,900

Monthly payment (60mo, 5.5%)$647

Total interest$4,920

Total cost$43,820

Frequently Asked Questions

Is sales tax calculated on the trade-in difference?▼

In most Canadian provinces (including Ontario), you pay sales tax on the full purchase price minus the trade-in value. For example, buying a $35,000 car with a $10,000 trade-in means you pay HST on $25,000. Some provinces like BC and Quebec may calculate differently — check your local rules.

What is BC's luxury car tax?▼

BC charges an additional provincial sales tax on vehicles over $55,000. The rates are: 7% PST on $55,000-$55,999, 8% on $56,000-$56,999, 9% on $57,000-$124,999, and 10% on vehicles $125,000 and above. These are on top of the 5% GST, and also on top of the 20% foreign buyer tax for non-residents.

Should I choose a longer or shorter loan term?▼

Shorter terms (36-48 months) have higher monthly payments but less total interest and lower risk of negative equity. Longer terms (72-84 months) have lower payments but cost significantly more in interest. At 5.5% interest, a $30,000 car costs $3,600 in interest over 48 months vs $6,400 over 84 months. Choose the shortest term you can comfortably afford.

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