A close-up shot of a person opening the door of a luxury car.

The Real Cost of Buying Luxury Cars in B.C.

September 30, 2021

Editor’s note: This article was originally published on November 16, 2020, and was updated on September 30, 2021 to show the impact of the proposed federal luxury tax.

Having built a successful career or business, many high-income earners like to reward themselves by purchasing a luxury car.  However, the true-cost of buying a luxury car in British Columbia can be almost three times the sticker price of the car once you consider the impact of personal income tax on your earnings, and B.C. PST, Federal GST and the proposed Federal luxury tax on the purchase price of the vehicle.

Personal Income Tax

If you are purchasing a new luxury car, then you are most likely in the top tax bracket, and the income that you will use to fund the purchase is most likely being taxed in that top bracket.  The top combined Federal and Provincial personal income tax rate in B.C. is 53.50% on income in excess of $220,000.


Effective April 01, 2018, the B.C. Government implemented a tiered rate structure for PST on the purchase of passenger vehicles.  Although the general PST rate is 7% in BC, the applicable sales tax rate for the purchase of passenger vehicles depends on the purchase price of the vehicle, and on how the vehicle was acquired.  Vehicles purchased from a business[1] at a purchase price of $150,000 or more are subject to a PST rate of 20%.


Vehicles purchased from a business are subject to a GST rate of 5%, regardless of the purchase price of the vehicle. For technical reasons, when the PST rate exceeds 7%, GST applies to the PST payable on the purchase of the vehicle.  GST will also apply on the amount of luxury tax payable on the purchase.

Luxury Tax

The 2021 Federal Budget proposes to introduce a luxury tax on the purchase of cars with a retail sales price over $100,000.  The tax is the lesser of:

  • 20% of the amount by which the sales price exceeds $100,000, and
  • 10% of the sales price.

If enacted into law, the luxury tax would be effective on January 1, 2022.

Income Required to Buy a Luxury Car

Let’s assume that you want to purchase a new sports car from a business, and that the price of the sports car is $200,000.  How much income do you have to earn to purchase the sports car?

Income before income tax$587,097
Less: income tax at 53.50%$314,097
Income after tax$273,000
Purchase price$200,000
Luxury tax – the lesser of$20,000
$20,000 [i.e. 20% x ($200,000 -$100,00)]
$20,000 [i.e. 10% x $200,000]
PST (20% of $200,000)$40,000
GST (5% of $260,000)$13,000

You have to earn $587,097 of income to fund the purchase (2.94 times the purchase price), and will pay total income and sales taxes of $387,097.  Only 34.1% of that income actually goes towards the purchase price of the car.  The remaining 65.9% is lost to income and sales taxes.

When you consider the luxury tax, B.C. PST, and GST, the effective sales tax rate on a $200,000 car is 36.5%.

Please contact your DMCL advisor in case of questions about the true-cost of buying a luxury car in BC.

[1]  As opposed to in a private sale.