Financing makes buying and owning a car more accessible for Canadians. But even financing can be a significant financial burden. One thing you might be wondering is “what is the average car payment in Canada?”
Curious to know if car financing is the right solution for your next vehicle and, if so, how much the average car payment could cost you?
Key Takeaways
- The average car payment depends on a few things, like the loan term, down payment amount, and interest rate.
- Car payments tend to be most expensive in BC, and cheapest in the Atlantic Region.
- There are a few things you can do to keep your car payments low, including opting for a cheaper car, leasing instead of financing, extending your loan term, making a bigger down payment, and shopping for a lower rate.
What Are Average Car Payments in Canada?
Several factors affect the cost of your car, which we’ll discuss below. Because of the variations of these factors, every driver’s car payment will differ quite a bit.
That said, a recent article from The Globe and Mail found that the average new car loan payment in Canada is roughly $880 per month. But nearly 30% of car buyers who finance their purchase pay at least $1,000 per month in car payments.
Used car payments are lower than new. According to a recent report from Auto Trader, the average monthly car payments for used vehicles is currently $618.
What Is The Average Price Of A Car In Canada?
According to the Auto Trader report, the average price of a car in Canada depends on whether it’s new or used:
- Average Price Of Used Cars: $35,754
- Average Price Of New Cars: $66,550
How Much Do Canadians Spend On New Cars By Province?
How much Canadians spend on their car payments depends on a number of factors including the car loan term, interest rate and car price. To illustrate, how much Canadians may be spending across the province, we’ve assumed the following:
- Average car loan interest rate: 7.59%
- Average car loan term: 70 months
- Down Payment: $5,000
| Region | Average New Car Price | Average Monthly Car Payment* |
| BC | $67,960 | $1,115.98 |
| Alberta | $70,037 | $1,152.80 |
| Saskatchewan & Manitoba | $66,236 | $1,085.42 |
| Ontario | $65,417 | $1,070.90 |
| Quebec | $64,911 | $1,061.94 |
| Atlantic Region | $62,791 | $1,024.36 |
Learn More: What Is The Average Car Loan Interest Rate In Canada?
What Factors Affect The Cost Of A Car Payment?
The following factors play a role in the cost of your monthly car loan payments:
Loan Amount
Your loan amount will obviously impact how much you pay in car payments. The more money you borrow, the more you have to pay back, which will affect the amount of your monthly payments.
Plus, there’s always the risk of ‘negative equity’ if you stretch out your car loan too far. This means you owe more on your car loan than what the vehicle is worth. By extending the loan term too much, you’ll end up paying more in interest over time, despite lower monthly payments.
Interest Rate
The interest rate your lender charges you will have a direct effect on the overall cost to borrow, as well as your monthly car payments. A higher rate will translate into higher loan payments.
Certain factors influence your interest rate, including the loan amount, down payment amount, loan term, your credit score, and vehicle age and condition. Ultimately, the higher the lender’s risk, the higher your interest rate may be.
Loan Term
The length of your repayment term can also affect how much interest you pay for your car loan. Generally speaking, a longer term means you have more time to repay your loan, which helps to keep monthly payments smaller and more affordable. However, a longer term means you’ll likely pay more interest than you would with a shorter term, even if it had a higher rate.
Fees
During your car loan term, you may also encounter various one-time or recurring fees that your lender charges for administrative purposes, like document processing and loan origination. Plus, you could receive a penalty fee for every late, short, or missed car payment, along with some added interest.
How Do Loan Terms And Interest Rates Affect My Car Payments?
The length of your loan term and the rate you’re charged can significantly impact the overall cost of your monthly car loan payments. For illustration purposes, we’ve used two illustrations to show you how changing just one variable can have an impact on your car loan payments. In both examples, the following variables remain constant:
- Car Price: $35,000
- Down Payment: $5,000
Example 1: How Interest Rates Affect Car Payments
| Interest Rate | Loan Term | Monthly Payments | Total Interest Payments | Total Car Cost |
| 5% | 60 months | $566.14 | $3,968.22 | $38,968.22 |
| 8% | 60 months | $608.29 | $6,497.51 | $41,497.51 |
Example 2: How Loan Term Affects Car Payments
| Interest Rate | Loan Term | Monthly Payments | Total Interest Payments | Total Car Cost |
| 5% | 48 months | $690.88 | $3,162.18 | $38,162.18 |
| 5% | 72 months | $483.15 | $4,786.65 | $39,786.65 |
How Can I Save Money On Car Payments?
Cutting back on your car loan payments can help keep more money in your pocket every month. Here are a few strategies to consider:
- Buy A Cheaper Car: An obvious way to minimize your car loan payments is to reduce your vehicle budget and focus on cars within the lower price ranges.
- Choose A Longer Loan Term: Extending the loan term will spread out your payments and reduce the amount you have to pay every month. Don’t forget that a longer loan term could mean more interest paid over the long run.
- Make A Bigger Down Payment: A larger down payment reduces the amount you have to borrow, and therefore can help reduce your monthly payments.
- Comparison Shop: Use an online loan aggregator like Loans Canada to compare different lenders and the rates they charge based on your credit and financial profile.
- Boost Your Credit Score: Applying for a car loan with good credit can increase your chances of getting a lower rate, which can make your car loan more affordable. Keep in mind that it takes time to build good credit, so be sure to factor in this extra time before going car shopping.
Learn More: How To Lower Your Car Payments Without Refinancing
Find The Best Car Loan Provider In Canada
Before you apply for car financing anywhere in Canada, make sure to get a loan cost estimate from your lender. You can also conduct a quick online search with a loan comparison platform to see where the best rates are based on your financial situation and needs.
Additional Expenses To Think About
While your monthly car payment is likely the biggest expense associated with owning a vehicle, there are a variety of other expenses you should prepare for.
- Gas – An SUV, pickup truck or another gas guzzler will cost you far more in the long run than a car with a smaller engine or hybrid-electric power.
- Maintenance – The more luxurious or rare your car is, the more expensive and difficult it can be to maintain. It can also lose value if you don’t keep it in shape.
- Repairs – Some cars are harder and costlier to fix than others. Your mechanic might charge extra if they don’t specialize in working on your specific vehicle or a part is hard to find.
- Registration – Fees can vary based on your region, what type of license plate your car needs and how heavy it is (cars over 3,000 kg can be pricier to register).
- Insurance – Many things can lead to high car insurance premiums. For example, if you’re younger than 25, you buy a newer car, or you have a bad driver’s history. Further, certain models are more likely to be stolen in Canada, which can increase the cost of insurance premiums.
| What Is The Average Car Insurance Rate In Canada? In Canada, the average annual car insurance premium varies significantly depending on the province and city. It also varies by factors such as driving record, vehicle type, and coverage levels. In Ontario, new drivers can expect to pay as high as $910 a month, with averages hovering around $611 for males and $429 for females. Insurance rates are often cheaper for women due to certain driving statistics. |
Should I Finance Or Lease A Car?
Leasing a car essentially means you’re renting it for a specific period, typically between 2 and 4 years. On the other hand, financing a car means you’re taking out a loan to pay for the vehicle, which you’ll repay over time with interest.
Here’s a quick comparison to help you decide between leasing versus financing:
| Financing | Leasing | |
| Vehicle Ownership | Owned once the car is paid off | Not owned; car must be returned at the end of the lease |
| Vehicle Customization | Yes | Not usually permitted |
| Mileage Limits | None | Yes; penalties for exceeding limits |
| Monthly Payments | Usually higher than leasing | Usually lower than financing |
Ultimately, financing a car can be potentially cheaper compared to leasing over the long run if you intend to keep the vehicle for a long time.
Learn More: Leasing a Car vs. Buying a Car
Final Thoughts
The average car payment ranges from one end of the country to the other. Your monthly payments will also depend on many other factors besides location, including the interest rate, loan term, and down payment.
