Looking for a car that’s safe, fuel-efficient, and that will last you more than a few years? Chances are it’ll have a significant price tag. In such cases, a car loan can prove extremely useful, if not necessary.
The good news is that there are a ton of lenders and dealerships across Canada that can give you an affordable car loan. You just need to know where to look.
Below, we’ve curated the ultimate guide to getting Canada’s best car loans.
Where Can You Get The Best Car Loans In Canada?
Luckily, there are many places in Canada where you can apply for car loans. Each of these lenders has different benefits, drawbacks, and approval requirements, so be sure to compare them properly before applying:
Car Dealerships
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 can charge slightly higher rates.
Banks & Credit Unions
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.
Online Subprime Auto Lenders
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.
Best Car Loans In Canada
| Amount | Interest | Term (Months) | ||
|---|---|---|---|---|
 | $500 - $50,000 | Up to 46.96% | 12 - 84 | Learn more |
 | $7,500+ | Varies | 24 - 96 | Learn more |
 | $500 - $35,000 | 29.99% - 46.96% | 9 - 60 | Learn more |
 | $500 - $10,000 | 12.99% - 39.99% | 9 - 36 | 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 |
How Can I Get The Best Deal On A Car Loan 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 Lenders And Dealership Offers
Though you may want your car right away, you shouldn’t necessarily choose the first lender or dealership you come across. Spend time researching different lenders in your area so you can find a vehicle, interest rate, and repayment plan that works for your finances.
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. Plus, your vehicle will likely be more reliable and cost-effective.
Offer Collateral
You may be able to apply for a secured car loan using one of your assets as loan security. Like a cosigner, this gives your lender assurance that you’ll pay on time. However, your lender will have the right to seize your asset if you miss too many payments.
Provide A Down Payment
A down payment is usually optional, depending on where you apply. However, most experts recommend that you put down at least 10% – 20% of the vehicle’s final asking price.
A down payment is a good move when financing a newer or more expensive model.
A larger down payment reduces the amount and repayment time of your debt. Plus, it can also help you qualify for a lower interest rate. Moreover, it informs your auto dealer know you’re a serious buyer, so they may offer you a few extra perks.
Get A Cosigner
What if your finances or credit aren’t good enough? You can strengthen your application and get a better car loan offer by finding a stronger borrower to cosign it. A cosigner gives your lender a way to protect their investment. The cosigner becomes responsible for your payments if you cannot pay.
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 to 800 is ideal. While there are subprime auto loans in Canada, improving your credit will lead to better interests rates and terms.
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.
That said, if you’re a newcomer with 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.
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 8%.
- Loan Term. While 84 to 96-month car loans can lead to low monthly payments, longer terms lead to more interest paid over the life of the loan.
- Fees. Dealerships can charge a lot of extra fees. Be sure to consider these costs before signing the agreement.
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
What Costs Can You Expect When Taking Out Car Loans in Canada?
There are many different costs and fees to pay after you’ve been approved for a car loan. These costs can include but aren’t restricted to your:
- Interest Rate
- Terms & Payment
- Fees
What Type of Interest Rates Are Available for Car Loans in Canada?
Interest is what lenders and dealerships charge in exchange for you borrowing from them. The rate you end up paying can fluctuate depending on the lender, what kind of vehicle you’re financing, and how strong your finances are. There are also two types of interest rate you may get:
- A fixed interest rate is be locked in once you’ve been approved and won’t change during your repayment term. While some fixed rates can be higher than variable ones, they make it easier to predict how much you owe every month.
- A variable interest rate fluctuates during your payment period due to several factors, mainly because of changes to Canada’s prime rate. Although this makes the cost of your car loan payments less predictable, you can save money when and if the prime rate drops.
Car Loans In Canada Terms & Payments
Your loan term and the size of your payments add up to the total cost of your car. After all, your vehicle’s advertised price won’t actually be its final cost, once you factor in fees and interest.
For instance, a longer term and small payments are more affordable at first, you pay more interest and fees overall. Larger payments are harder on your budget, but typically help you pay off the car faster. Either way, you should be careful not to take on a repayment plan that you cannot handle.
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.
Alternative To Car Loans: Auto Loan vs. Personal Loan
An auto loan is not the same as a personal loan. However, you can use both to finance your car purchase.
When you secure the loan with a car, you take out an auto loan. You can only use the money on the car. The car guarantees the money.
A personal loan is not tied to the asset you are buying. This is an unsecured loan. You can use the money for anything.
Looking For The Best Car Loans In Canada?
Loans Canada can help make your search easier. Whether you’re looking to finance a new or used car, we can connect you with the right lenders and dealerships in your area.
