Canada's federal luxury tax — in effect since September 1, 2022 — is one of those topics people avoid because it sounds complicated. Here's the short version, and the part that matters most if you're shopping used: it does not apply to used vehicles already registered in Canada.
What the luxury tax is
The tax applies to new vehicles with a retail price over $100,000 that have never been registered in Canada. A used vehicle that's already been registered here is exempt — which is exactly why a lightly-used luxury car can be a much better buy than the same model new: you skip both the steepest depreciation and the tax.
The tax only covers vehicles with four or more wheels seating ten or fewer passengers. It does not apply to emergency vehicles, hearses, motorcycles, commercial trucks, buses, most RVs, ATVs, snowmobiles, or vehicles over 3,856 kg.
How it's calculated
For a vehicle over the $100,000 threshold, the tax is the lesser of:
- 20% of the value above $100,000 — e.g. on a $105,000 vehicle, 20% of $5,000 = $1,000.
- 10% of the full retail price — on that same vehicle, $10,500. The lesser amount ($1,000) is what applies; the 10% method only wins out above roughly $200,000.
The fine print that catches people
Improvements matter. If you add $5,000 or more in improvements (not repairs) within a year of purchase or lease start, they count toward the vehicle's value — a $98,000 car with $5,000 in add-ons becomes a $103,000 car and crosses the threshold.
Only tangible items count: insurance, gap coverage, and warranties are not part of the calculation.
And once a vehicle has attracted the luxury tax as a new import, trading it in below $100,000 doesn't retroactively change anything — think of it as "once a luxury, always a luxury" for that first retail sale.
What this means for you
If you're shopping above $100,000, the lightly-used route usually wins: a Canadian-registered vehicle with low kilometres avoids the tax entirely. We stock inspected vehicles you can browse today, and if the exact car you want isn't listed, your agent will search Canada-wide for it. Either way our pricing is all-in, so there are no surprise fees at signing.