Car prices in Canada are rising. The average price of a new car is $67,259, and the average price of a used car is $36,863. That’s a lot of money to pay upfront.
Fortunately, car loans are readily available from dealerships, banks, and online lenders to help you cover the cost of this significant purchase. However, car loans can also be expensive. It’s important to compare offers to find the best car loan.
Below, we’ve curated the ultimate guide to getting Canada’s best car loans.
Key Points
- Car loans are available from traditional banks, car dealerships, and alternative lenders.
- To get the best deal on a car loan, consider improving your credit score, making a larger down payment, buying new, and comparing lenders and their offers.
- When comparing car loans in Canada, be sure to look at interest rates, lender fees, and loan terms.
Best Car Loans In Canada
| Amount | Interest | Term (Months) | ||
|---|---|---|---|---|
 | $500 - $50,000 | Up to 35% | 12 - 84 | Learn more |
 | $7,500+ | Varies | 24 - 96 | Learn more |
 | $500 - $35,000 | Starting at 29.99% | 9 - 60 | Learn more |
 | $500 - $10,000 | 12.99% - 34.99% | 9 - 60 | Learn more |
 | $5,000 - $40,000 | Varies | 12 - 72 | Learn more |
 | $5,000 - $45,000 | 4.90 % - 29.95% | 36 - 72 | Learn more |
 | Varies | 11.9% + | 12 - 84 | Learn more |
 | Up to $50,000 | Varies | 12 - 84 | Learn more |
Car Loan Features
Key features of car loans are as follows:
| Car Loan Amount | Depends on the lender, car age, condition and your finances. In general most lenders offer up to $50,000 to $70,000. |
| Car Loan Interest Rate | Varies based on your finances. In general loans range around 5% – 8%, though rates can go up to 35% APR |
| Car Loan Terms | 12 – 96 months |
| Cars You Can Finance | Any new or used cars (usually up to 10 years old) |
Do Car Dealerships Offer The Best Car Loans In Canada?
When purchasing a car from a car dealership, most Canadians opt for in-house financing, where you pay them directly and avoid having to apply for a car loan with a bank or private lender. Car dealerships will usually have less restrictive approval requirements than banks if it means making a sale, but they can charge slightly higher rates.
How Does In-House Financing Work?
Car dealerships often offer in-house financing, which lets you take care of your car loan at the same time you finalize your vehicle purchase. In-house financing involves financing a car directly through a dealership program instead of applying for a loan through an outside lender or through a dealership’s third-party lender partners.
In this way, the dealer serves as the lender. Loan repayments are then made to the dealership rather than an external lender.
Dealerships may sometimes be willing to work with lower credit borrowers who may have trouble getting financing from traditional lenders. However, rates may be higher.
Do Banks Or Credit Unions Offer The Best Car Loans In Canada?
If you’d prefer a more traditional approach, many banks and credit unions can also offer you vehicle financing. Some borrowers prefer financial institutions because they are generally more secure and offer better rates than alternative lenders.
However, drivers with weaker finances and credit may find it difficult to get approved.
How Do Bank Car Loans Work?
You can apply for a car loan directly through a bank. Or, the dealership you purchase the vehicle from may be partnered with a bank that provides vehicle financing, in which case you can apply with the dealership to get bank financing.
Bank car loans typically require good credit and come with more competitive interest rates.
Here are the key features of car financing offered by some of Canada’s big banks:
| Loan Amount | Term | |
| TD | – Cars less than 5 years old: N/A – Cars more than 5 years old: up to $50,000 | Up to 96 months |
| Scotiabank | Up to $200,000 | Up to 96 months |
| CIBC | $3,000 and up | 12–96 months |
| RBC | $7,500 — $75,000 | 12–96 months |
Do Online Car Loan Lenders Offer The Best Car Loans In Canada?
Alternative lenders can be a good option for those with poor credit or low income because they often have fewer requirements. As such, borrowers with bad credit and low incomes won’t have as much trouble qualifying for a subprime auto loan in Canada.
Interested consumers can easily apply for these loans online and get approved within 24 hours. That said, these lenders generally charge a higher interest rate than banks, so the car loan cost is usually higher.
How Do Online Car Loans Work?
Online car loans work similarly to bank loans, but the process is fully digital. You can apply directly through a lender’s website, where you complete an application form and submit required documents electronically. If your application is approved, you can accept the agreement online.
You would then visit the dealership, pick out your car, and finalize the purchase. The funds are then made available, and are often dispersed directly to the dealership. This convenient approach can speed up and simplify approval and loan processing, making it easier to finance your vehicle purchase.
How To Get The Best Car Loan Offer In Canada?
Cars come in all shapes, sizes, and costs. If you want the best deal on your car loan, here are some extra tips to help you find it:
Compare Dealership Offers
Though you may want your car right away, you shouldn’t necessarily choose the first dealership you come across. Dealerships often advertise various types of incentives to attract customers, including low-rate and sometimes 0% financing. That said, such deals aren’t always readily available, and they may only apply to specific models or to those with strong credit.
Compare Lenders
Spend time researching different lenders in your area so you can find a vehicle, interest rate, and repayment plan that works for your finances. Thanks to the internet and savvy online loan search platforms like Loans Canada, you can quickly populate a list of lenders and their offerings to see where you can get the best deal.
Look Into Newer Vehicles
Despite being more expensive initially, vehicles that are less than two years old often come with better rates because the lender or dealership isn’t risking as much as they would with a second-hand vehicle.
Offer Collateral
You may be able to apply for a secured car loan using one of your assets as loan security. Traditional car loans are collateralized by the vehicle, but you may also be able to secure your loan with other valuable assets. This reduces the lender’s risk and helps improve your chances of getting a loan with a lower rate. Just keep in mind that your asset is at risk in the event that you default on the loan.
Provide A Down Payment
Depending on the lender, a down payment may be optional. However, most experts recommend that you make a down payment regardless, at least 10% to 20% of the vehicle’s final asking price.
A down payment is a good move when financing a newer or more expensive model. And the bigger the down payment, the less you have to borrow. It can also help you qualify for a lower rate, making your loan even more affordable.
Get A Cosigner
If your finances or credit score aren’t strong enough, you can strengthen your loan application and get a lower rate by adding a cosigner to the loan contract. A cosigner promises to take over loan payments if you don’t pay. This reduces the lender’s risk and can make it easier for you to qualify for a car loan.
Improve Your Credit
Your credit score can have a big impact on your car loan interest rate and terms. To get the best car loan offer, a credit score of at least 660 is ideal.
Learn more: What Credit Score Do You Need For A Car Loan?
Can You Get A Car Loan To Buy A Used Car From A Private Party?
Loans are available to help finance the purchase of used cars from private sellers. You can apply for a loan through a bank, credit union, or alternative lender.
The loan may be secured, using the vehicle as collateral. Or, the loan can be unsecured, depending on the age and mileage of the vehicle, and your financial and credit health.
If your loan application is approved, you can use the funds from the loan to pay the seller. Then, you’ll make installment payments to the lender to repay the loan. This approach lets you buy a used car from a private seller without having to come up with the full amount upfront.
Learn more: Private Party Auto Loans
Requirements To Apply For Car Loans In Canada
Every lender and dealership has its own loan requirements. However, there are a few personal and financial details that you’ll have to provide to qualify for the best car loan. These typically include:
- Name, address, and other personal information (proof of identity)
- Bank account details and other financial information (proof of income)
- Employment status and job title
- Vehicle make, model, and cost (if applying with a bank or other lender)
- Down payment amount
Where Can I Get The Best Car Loan In Canada With Bad Credit?
If you have bad credit, applying for a car loan with a car dealership or subprime auto lender will likely be your best option. As mentioned, these lenders generally have more flexible requirements, making it easier to qualify for a car loan.
Learn more: Bad Credit Car Loans Canada 2025
Can You Get A Car Loan As A Newcomer To Canada?
That said, if you’re a newcomer with a limited credit history, you may be eligible for car loans with big banks. Many big banks have specialized car loan offers for those who are new to Canada and haven’t yet had a chance to build their credit. To make up for this deficiency, you may need to prove that you earn a good income and are able to make a substantial down payment.
Learn more: A Guide To Car Loans For Newcomers To Canada
How To Compare Car Loan Offers?
When comparing car loan offers, it’s essential to consider the interest, term length, and fees. All these factors will help you understand which is the best car loan offer.
- Interest Rate. The interest rate you get can have a significant impact on your car loan payment and total cost. Currently, the average interest rate for a car loan is around 6.92%. The lower the rate, the less your loan will cost you.
- Loan Term. Longer car loans can lead to low monthly payments, which may fit in better with your budget. But longer terms lead to more interest paid over the life of the loan. Shorter terms may result in higher monthly payments, but they’ll cost you less in interest and can help you pay off your loan faster.
- Fees. Dealerships can charge a lot of extra fees. Be sure to consider these costs before signing the agreement.
What Type of Interest Rates Are Available for Car Loans in Canada?
Two types of interest rates may be charged on your loan:
- Fixed Rates. A fixed interest rate is locked in once you’ve been approved and won’t change during your repayment term. While fixed rates can be higher than variable rates, fixed rates keep your payments the same, making it easier to predict what you owe each month.
- Variable Rates. A variable interest rate fluctuates throughout your payment period due to several factors, mainly because of changes to Canada’s prime rate. While this makes your loan payments less predictable, you can save money if the prime rate dips. However, if the rate increases at some point during the term, your payments will increase.
How Getting The Best Car Loan Can Impact Cost
As mentioned, your interest rate, loan term, loan amount, and down payment will directly affect the cost of your car loan. To help you understand how differences in these factors can influence your car loan, let’s illustrate using a couple of examples using the following:
- Car Price: $40,000
- Down Payment: $10,000
- Loan Amount: $30,000
Example 1:
In this example, we will compare how differences in interest rates can affect your car loan (using a 60-month loan term):
| 5% | 8% | 10% | |
| Monthly Payment | $566.14 | $608.29 | $637.41 |
| Total Interest Paid | $3,968.22 | $6,497.51 | $8,244.68 |
| Total Loan Cost | $33,968.22 | $36,497.51 | $38,244.68 |
In this example, we can see that your monthly payments would decrease by $71.27 and you would save $4,276.46 in interest over the loan term just by lowering your interest rate from 10% to 5%.
Example 2:
In this example, we will compare how differences in loan terms can affect your car loan (using a 7% interest rate):
| 36 Months | 60 Months | 84 Months | |
| Monthly Payment | $926.31 | $594.04 | $452.78 |
| Total Interest Paid | $3,347.26 | $5,642.16 | $8,033.55 |
| Total Loan Cost | $33,347.26 | $35,642.16 | $38,033.55 |
As you can see, cutting your loan term from 84 to 36 months can save you $4,686.29 in interest, though your monthly payments will be $473.53 higher.
What To Know About Fees For Car Loans In Canada
There will also be several fees included with your car loan, which vary by where you apply and the conditions of your repayment plan. For example, traditional lenders, like banks, often charge for administrative services, such as loan origination.
If you apply for in-house financing through a dealership, you may also encounter fees for documentation, licensing, and pre-delivery costs. Do these add value to the car? No. You can try to get the dealer to waive them.
In some cases, these are one-time fees to be paid when your term ends, in others, they are applied on a per-payment basis. Ask your car loan provider for a price quote before you sign any contracts.
Learn more: Are Car Dealerships Charging Canadian Consumers Hidden Fees?
Alternative To Car Loans: Auto Loan vs. Personal Loan
While a traditional car loan is the conventional way to finance a vehicle purchase, you can choose to take out a personal loan to get the funds needed to buy a car. So, what’s the difference between the two?
Auto Loan: When you secure the loan with a car, you take out an auto loan. You can only use the money on the car, and the vehicle secures the loan. This is considered a type of secured loan, which means your car is at risk of repossession if you fail to make loan payments in the future.
Personal Loan: A personal loan is not tied to the asset you’re buying. The money you get from the loan can be used for anything, including buying a car. In this way, you’re essentially a cash buyer.
Personal loans can be both secured or unsecured, depending on whether you collateralize the loan with an asset. Unsecured loans are riskier, so loan amounts and interest rates tend to be higher.
Learn more: Unsecured Vs. Secured Loan: What’s The Difference?
Final Thoughts
Auto loans make buying a car more accessible for many Canadians. But it’s essential to compare loan offers to find the lowest interest rates and best terms. Whether you’re buying new or used, it’s important to shop around with different lenders and understand the total cost of financing before making a decision. With the right auto loan, you can buy a vehicle while ensuring your loan costs comfortably fit within your budget.
