These days, more drivers are looking to help the environment or reduce their fuel costs by buying a hybrid or electric vehicle. While the sales prices and associated costs can sometimes be higher than the average gas-fueled vehicle, the investment can be worthwhile, especially if you’re able to get around more easily and minimize your carbon footprint in the process.
Let’s find out more about how to finance a hybrid or electric car to make this purchase a more easily accessible one.
Key Points
- Financing a hybrid or electric car is not unlike getting a car loan for a gas-fueled vehicle.
- Hybrid or electric car loans provide you with a lump sum of money to cover the purchase price, which you must repay over a set loan term with interest.
- You can get financing from banks, credit unions, and alternative lenders.
- You may also qualify for government incentives when buying a hybrid or electric vehicle, which can reduce your upfront costs.
How To Finance A Hybrid Or Electric Car In Canada
You can finance a hybrid or electric vehicle in much the same way you would finance a gas-fueled vehicle. Financing sources for EVs and hybrid cars include the following:
- Banks and credit unions
- Alternative lenders
- In-house dealership financing
Traditional car loans are available to finance the purchase of an EV or hybrid car, which involves accessing a lump sum of money, then repaying the loan, plus interest, through installment payments. The car collateralizes the loan.
Alternatively, you may choose a personal loan, which works similarly to a car loan, though the funds can be used for many other purposes. Again, the loan would be repaid in installments until the full loan amount, along with interest, is paid back. However, it’s generally recommended to get a car loan as it usually has lower interest rates than a personal loan, since it’s secured.
Leasing Programs
Additionally, leasing can also be an option, which provides flexible terms, lower monthly payments, and the ability to trade in your car for a new one every 2 or 3 years.
When financing a hybrid or EV, be sure to consider the following factors:
- Battery range
- Battery charging infrastructure
- Potential fuel savings
Also, look into incentives and rebates, as they can significantly reduce upfront costs. Manufacturers and dealerships may also offer special financing programs or rebates for EVs.
Hybrid Vs Electric Cars
Although both hybrid and electric cars can help you decrease your fuel consumption and environmental impact, there are a few key differences between them:
- Hybrid Cars – These vehicles contain a regular gasoline engine and an electric battery pack, which makes them a slightly better option for driving long distances or travelling to remote locations where there aren’t any charging stations nearby.
- Electric Cars – These vehicles are also powered by high-voltage battery packs or, in some cases, hydrogen fuel cells. Although you may not be able to drive long distances, most electric cars produce fewer emissions than hybrid or normal cars.
Steps On How To Finance A Hybrid Or Electric Car In Canada
To finance a hybrid or electric vehicle in Canada, follow these steps:
Step 1. Research The Vehicle And Incentives Available
As mentioned, you’ll want to first do some homework on the types of EVs available and ensure they align with your budget. Not only should you look at the ticket price, but also available incentives.
- Choose the best EV for your needs: Consider the following factors:
- Range
- Charging station availability
- Lifestyle compatibility
- Look into available rebates: Research government programs designed to support hybrid and EV purchases and maintenance.
- Check automaker offers: Many car manufacturers provide exclusive financing deals or rebates designed for hybrids and EVs. See what’s currently available with various EV manufacturers to maximize your savings.
Step 2. Get Pre-Approved
Once you determine which hybrid or EV is best for you, it’s time to shop around for quotes. When doing so, consider getting pre-approved for financing to see what rates and terms are available to you from different lenders. Getting pre-approved will not only tell you what you can afford, but it will also strengthen your stance when you shop with dealers and apply for financing.
Step 3. Finalize The Deal
If you’re eligible for EV incentives or rebates, make sure these are applied to your transaction to lower the price of the vehicle you’re buying. Carefully read over the purchase agreement and loan contract to make sure you understand all terms and that all costs are detailed.
If you’re comfortable negotiating, consider asking the dealer to throw in additional perks, such as maintenance packages, extended warranties, or home charging stations.
What Do You Need When Applying To Finance Your Hybrid Or Electric Car?
Every lender, dealership and financial institution has different lending standards for their prospective customers. Some are more strict and only accept strong borrowers, while others are more lenient about who they lend to.
All that said, there are a few standard documents that you’ll need to present when applying for a car loan to finance the cost of your hybrid or electric car, including the following:
| Personal Information | A valid Canadian driver’s license Personal government photo ID (passport, health insurance card, etc.) |
| Financial Details | Proof of income (recent bank statements or pay stubs) |
| Other Documents | An active driver’s insurance policy A pre-authorized debit form or VOID cheque (for loan deposit/payments) |
What Credit Score Do You Need To Finance Your Hybrid Or Electric Car?
While most lenders simply want to confirm that your income is good enough for you to afford all your car loan payments, many will check your credit report and credit score when you apply. This way, they can see how you’ve handled your previous credit products and how risky you could be as a client.
Your credit score plays a key role in determining your ability to qualify for a loan. A higher credit score shows lenders that you’re a responsible borrower, making it easier to get approved and secure a lower interest rate, higher loan amount, and more favourable terms.
Learn more: What Credit Score Do You Need For A Car Loan?
Where Can You Finance A Hybrid or Electric Car?
In Canada, there are a few different places you can apply for a loan to finance your hybrid or electric vehicle. Each of these sources have benefits and drawbacks, so be sure to do a lot of research before you apply with any of them.
Banks & Credit Unions
Traditional financial institutions are popular places to apply for any sort of financing, because loans may be larger, interest rates may be lower, and repayment plans are often longer. That said, it can be difficult to qualify for financing from a bank or credit union, especially if you’re not a longtime member, you don’t have a great income, or your credit score is low.
Dealerships
Most auto dealers offer in-house financing. Not only is this more convenient, but you can also increase your approval chances and receive extra perks by providing a down payment or trading in your used car. Plus, many auto dealers will accept bad credit. However, dealerships sometimes charge higher rates and have shorter repayment terms.
Alternative Lenders
These types of lenders are available both online and in person and may be the best places to apply if you have bad credit or a low income, as approval requirements are more flexible.
If vehicle loans aren’t offered, you may be able to apply for a personal loan. Some alternative lenders will provide smaller loans with higher rates and shorter terms.
Learn more: Bad Credit Car Loans In Canada
Best Car Loan Providers
| 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 |
Special EV Financing Offers In Canada
Some EV carmakers offer financing promotions from time to time. It’s helpful to check back occasionally to see what current offers may be available. Currently, the following EV manufacturers are offering the following promotions:
| Vinfast EVs | Financing rates as low as 1.49%. | Learn more |
| Kia EVs | $1,500 Spring Bonus 1% Loyalty Bonus | Learn more |
| Lucid EVs | Bonus offers up to $3,000 | Learn more |
Types Of Hybrid And Electric Cars You Can Finance
Several hybrid and electric car brands and models exist, each of which has its own costs, benefits, drawbacks, and specifications. Here are some of the more popular types of hybrid and electric cars available in Canada:
- Plug-in Hybrids – As the name suggests, a plug-in hybrid comes with a charging cable that you can plug into an external port at home, the office, or at a public terminal. Typically, they have larger battery packs than other kinds of low emissions vehicles, again making them ideal for longer drives.
- Battery Electric Cars – As mentioned, most fully electric cars come with a high-voltage battery pack that produces zero emissions or liquids. Although it can be worrisome to drive without the possibility of using regular fuel when your battery dies, public charging stations are becoming more abundant every year.
- Series Hybrids – With this type of hybrid, the gasoline motor is solely for the purpose of recharging the car’s battery pack. Additionally, the wheels and the engine aren’t connected like a normal car. However, the semi-electric engine provides smooth handling and just as much acceleration as other green vehicles.
- Parallel Hybrids – These are the most common kinds of hybrid vehicles seen on the roads these days. With this type of vehicle, an everyday automatic, manual or continuously variable transmission (CVT) will combine the gasoline engine and electric battery pack for an all-in-one driving experience.
Cost Of Financing A Hybrid Or Electric Car
As mentioned, hybrid and electric cars can be more expensive than normal gas-powered vehicles. Thankfully, a big enough car loan can help you finance almost any make or model, new or used.
You can use this car loans calculator to calculate your car loan payments.
Other Costs To Consider
Besides the final sales price, here are some of the other costs you’ll encounter when buying a hybrid or electric car:
Down Payment
You may need a down payment to take out a car loan to finance your hybrid or electric vehicle. However, some dealerships may offer no down payment loans. That said, it’s recommended to put down at least 20% of the vehicle price. This will increase your chances of loan approval with a lower interest rate. Plus, it will decrease the amount you need to borrow.
Learn more: No Down Payment Car Loans
Sales Tax
Don’t forget to factor in the sales taxes on your hybrid or electric car purchase. This could be the Goods & Services Tax (GST), Harmonized Sales Tax (HST), Provincial Sales Tax (PST) or Quebec Sales Tax (QST).
Lenders in some provinces and territories only charge one type of sales tax, while others will charge a combination of them.
Learn more: Taxes On Cars In Canada: Dealership vs. Private Sale
Fees
Your lender or dealership’s service and administrative fees can increase the size of your loan or vehicle cost. When you apply with a lender, you may see more administrative fees for things like document processing and loan origination. At a dealership, you may see those same fees, plus others for any services the car has undergone, like pre-delivery inspection and maintenance.
Non-Financing Costs
In addition to the costs of financing your hybrid or electric car, you should also factor these other standard vehicle costs into your budget:
- Electricity and/or gasoline
- Servicing and repairs
- Licensing and registration
Is It Expensive To Insure An Electric Vehicle?
Insuring an electric vehicle can be more expensive compared to a gas-powered car for a few reasons:
- Higher Repair Costs: EVs come with specialized parts that can be more expensive to replace, such as batteries.
- Higher Vehicle Costs: EVs typically cost more to buy, which increases insurance premiums.
- Fewer Repair Shops: Not as many mechanics specialize in repairing EVs, which can result in higher service fees.
Having said that, some insurance companies offer incentives or discounts for EV owners, which can help offset the premium costs. Further, the exact cost of insurance on an EV depends on the make, model, and condition of the car.
Learn more: Insuring An Electric Car In Canada
Are There Any Rebate For Hybrid Or Electric Vehicles?
The iZEV Program provides incentives to qualifying Canadians who purchase or lease eligible zero-emission vehicles (ZEVs). However, the rebate for ZEVs made in countries with no free-trade agreement with Canada ended October 1, 2024. To be eligible, the ZEV must have already been in Canada or on its way to Canada prior to October 1, 2024.
| Province | Rebate Amount | |
| British Columbia | Up to $4,000 | Learn More |
| Alberta | None | – |
| Saskatchewan | None SK government charges a $150 annual road-use fee to owners of Class LV electric vehicles | Learn More |
| Manitoba | Up to $4,000 | Learn More |
| Ontario | No longer available | – |
| Quebec | Up to $7,000 | Learn More |
| New Brunswick | Up to $10,000 | Learn More |
| Nova Scotia | Up to $3,000 | Learn More |
| Newfoundland | Up to $2,500 | Learn More |
| PEI | Up to $5,750 | Learn More |
Learn more: Are The Sale Rebates For Electric and Hybrid Cars Worth it?
Pros And Cons Of Financing A Hybrid Or Electric Car
Before you apply for a car loan to purchase your hybrid or electric vehicle, be sure to weigh the pros and costs of such a purchase.
Pros
The following are some perks of financing a hybrid or electric car:
- Fuel Efficient. Electric and hybrid vehicles are gentler on the environment thanks to their fuel efficiency. Plus, they’re quieter, which can be ideal when driving around quieter neighbourhoods.
- Lower Operating Costs. Electricity is currently cheaper than gasoline. As such, you may encounter lower operating costs to charge up an electric or hybrid vehicle compared to a gas-fueled car.
- Extended Range. Hybrids in particular can take you longer distances on one charge because of the ability to switch between gas and electric power.
- Tax Incentives. Government incentives and rebates are available to qualifying applicants, which can reduce the overall cost of a vehicle purchase.
Cons
Be sure to consider the potential drawbacks to buying a hybrid or electric car:
- Limited Range: Fully electric cars generally have shorter ranges compared to gas-powered cars.
- Charging Station Availability. Charging stations are not as widely available as gas stations, particularly in rural areas. However, the infrastructure continues to improve every year.
- Long Charging Times. Charging times can be quite lengthy, and may take anywhere from 30 minutes to a few hours, depending on the charger type.
- Battery Replacement Costs. Batteries can be expensive to replace after a few years.
- Higher Upfront Cost. Electric vehicles are typically more expensive for similar gas-powered models.
Should I Finance Or Lease A Hybrid Or Electric Vehicle?
Besides financing a hybrid or electric vehicle, there’s also the option to lease. Choosing between leasing and financing depends on your driving habits and financial goals.
- Financing: This option is ideal if you plan to keep your car for a long time and want to build equity in it, since you’ll own it outright by the end of the loan term.
- Leasing: This option typically offers lower monthly payments and the ability to upgrade to newer models every 2 or 3 years. Leasing may also cover maintenance, but you don’t own the vehicle.
Learn more: Leasing A Car In Canada
Final Thoughts
Hybrid and electric car financing makes driving a fuel-efficient and environmentally-friendly vehicle more accessible. With various loan options and government rebates and incentives, owning a hybrid or EV doesn’t have to strain your budget. Be sure to do some research and compare lenders and their offers before signing your car loan contract.
