Thinking of getting a car loan? While getting the lowest car financing rate is ideal, not all borrowers qualify for the competitively low rates advertised by traditional car loan lenders.
To find a competitive rate, it pays to shop around and compare rates and terms from a variety of lenders. It also helps to benchmark against the average car loan interest rate in Canada so you can quickly determine how much more or less the lender would like you to pay.
The average car loan rate is 7.50%, according to Statistics Canada.
The average buyer may pay around 6.7% and 9% interest on their car loan, depending on their credit score, whether the car is new or used, the purchase price of the car and whether the loan is based on a fixed or variable interest rate.
To get a car loan, you’ll need to be employed for at least 3 months and earn at least $1,500-$2,000 per month. Bad credit is okay with some lenders, but you’ll get some of the best rates available in Canada if your financial profile is strong.
| Loan provider | Interest rate | Loan term | Key features | |
|---|---|---|---|---|
 | 3.90% - 29.90% (new and used car loan rate) | 12 - 96 months |
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 | 0% - 46.96% (new and used car loan rate) | 3 - 60 months |
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 | 3.90% - 29.90% (used car loan rate) | 12 - 96 months |
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 | From 8.49% (used car loan rate) | 24 - 96 months |
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 | 6.99% - 29.99% (new and used car loan rate) | 12 - 96 months |
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 | 4.90% - 29.95% (new and used car loan rate) | 3 - 96 months |
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 | From 7.99% (used car loan rate) | 12 - 96 months |
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 | 8.99% - 46.96% (new and used car loan rate) | 72 - 84 months |
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 | 5.99% - 12.99% (new and used car loan rate) | 1 – 8 years |
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 | 5% - 15% (new and used car loan rate) | Up to 96 months |
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 | From 6.9% (new car loan rate) | Typically 1-5 years |
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 | 7.99% (cars 5 years old or newer) | Up to 5 years |
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 | From 7.95% (EVs and hybrid rates) | Up to 10 years |
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 | 5.65% - 7.95% (new and used car loan rate) | Typically 3-8 years (new), 3-5 years (used) |
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 | 6.99% (new car loan rate) | Up to 4 - 8 years depending on the car's year |
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 | From 7.79% (for vehicles up to 3 years old) | 1 - 7 years |
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Car brands such as Ford, Honda and Chevrolet also have financing offers, which you can get through dealerships. These offers typically change every month.
Check out this month’s rate offers for new cars from popular car brands in Canada.
| Model | APR | Loan term |
|---|---|---|
| 2024 Honda Civic Si | 7.29% | 84 months |
| 2024 Chevrolet Silverado 1500 | 0% | Up to 72 months |
| 2025 Hyundai Elantra (Essential) | 5.49% (with $2,995 down) | 84 months |
| 2024 BMW 3 Series | From 5.49% | 24 – 84 months |
| 2024 Nissan Rogue | From 0.99% | 24 months |
| 2024 Lyriq | 0% | Up to 72 months |
Offers last verified on November 1, 2024 and expire on December 2, 2024 (where an expiration date is disclosed). Offers are on approved credit, vary by region and may have other conditions.
Used car loan rates vary depending on the vehicle. To give you an idea of what’s available, here’s a snapshot of used car financing offers for certified pre-owned (CPO) cars in Ontario.
| Brand | APR | Loan term |
|---|---|---|
| Nissan | From 3.99% | Up to 24 months |
| Mercedes | From 3.99% | Up to 72 months |
Offers last verified on November 1, 2024. Offers are on approved credit, vary by region and may have other conditions.
According to Statistics Canada, the average car loan interest rate has increased from 3.76% in July 2016 to 7.79% in April 2024—an increase of 4.03 percentage points in 8 years. Although rates dropped in 2020, they rose sharply afterwards, particularly in 2022 after the rate hikes by the Bank of Canada.
In Canada, car loan rates are calculated using a lender’s prime rate—a rate that is adjusted by the Bank of Canada (BoC) in response to changes in the economy and monetary policy. When the prime rate increases, lenders increase car loan rates to maintain their profitability. When the prime rate goes down, lenders lower their auto financing rates, to remain competitive and attract borrowers.
The chart below shows the BoC’s rate moves from 2013 to 2024. When we compare the average car loan rates and BoC rate moves, we can see a similar pattern.
The Bank of Canada cut the overnight rate by 25 basis points on September 4, 2024 and by 50 basis points on October 23, 2024. The rate is now 3.75%, and economists expect the central bank to cut the rate by another 50 basis points on the next rate announcement on December 11, 2024.
If the BoC decides to continue to cut rates for the rest of 2024, you can expect car loan interest rates to go down as well.
"In the fall of 2023, we knew it was time to upgrade from our 2005 Toyota Corolla to a more spacious SUV for our family of three. We wanted a reliable used SUV with heated seats, Bluetooth, and optional third-row seating.
We followed the 20/4/10 rule to set our down payment savings goal, aiming for a 48-month loan term and a monthly payment under $250. After narrowing down options, we settled on a 2016-2020 Toyota 4Runner Limited with under 100,000 km. We saved for 12 months and planned to finance around $9,000, including HST.
We preferred a dealership that offered financing to avoid penalties some dealers charge for outside loans. We found our 4Runner at a Chrysler dealership in the GTA and worked out the financing terms.
At the dealership, we discussed our credit scores, income, and homeownership status with the finance manager. Doing our research saved us from financing more than we wanted, which would have increased the total cost.
We financed $8,900 over 48 months at 8.99% interest with National Bank. I pushed for a lower rate, but they wouldn’t budge unless we financed more. We made sure there were no penalties for early repayment, as we plan to pay off the loan early.
You can often competitive rates from the following providers:
Dealerships are partnered with banks and other lenders to help you sift through offers and find the best rate. Dealers also give banks lots of business and, in exchange, gain access to reduced bank car loan rates. Finally, dealers want you to purchase one of their cars, so they have an incentive to present you with an attractive financing offer.
That said, going straight to a dealership doesn’t guarantee that you’ll get the best car loan rate, so it pays to get car loan pre-approval somewhere else first so you can negotiate with the dealer to match it or give you a better rate.
Online loan search platforms like CarsFast and Loans Canada are partnered with hundreds of dealers and lenders and can match you with the best car loans for your situation. You can apply even if your credit score isn’t great, but be prepared for higher interest rates. Compare online car loan options above.
Another option is to head straight to a bank or credit union. While financial institutions do not have an incentive to sell you a car, they may still offer competitive interest rates.
The best bank car loan rates in Canada are from banks that offer financing through dealerships, which include RBC, TD, CIBC and Scotiabank. Since dealerships can provide banks with large volumes of credit applications, banks in exchange can give them access to the lowest rates.
You can also get an idea of your bank car loan rate by using the RBC My Auto Affordability Tool. Finding out your rate offer through this tool won’t impact your credit score.
Here’s a sneak peek of a real prequalification offer with RBC, Canada’s largest bank, for a borrower in Ontario based on the current rate environment.
The borrower meets banks’ typical minimum requirements of a 650+ credit score and a debt-to-income ratio under 40%. The offer is based on a $0 down payment and no trade-in vehicle.
Check out the latest special offers available through TD:
| Model | APR | Loan term |
|---|---|---|
| 2024 Alfa Romeo Giulia | From 1.99% | 36-96 months |
| 2024 Chevrolet Camarro | 4.99% | 12-84 months |
| 2024 Charger Daytona | 6.99% | 60-96 months |
| 2024 Fiat 500e | From 0% | 36-96 months |
| 2024 Kia EV6 | 6.99% | 60-96 months |
Offers last verified on November 1, 2024. Offers are based on approved credit.
While fluctuations in the prime rate will influence the interest rate on an auto loan, lenders also use a variety of other factors to set their interest rates, including the borrower’s credit score, loan term, loan amount and the current competitive landscape.
As a result, a good interest rate on a car loan in Canada is a rate that is equal to or near the current national average car loan rate of 7.50%.
If you have good credit, then car loan rates for new cars are typically 0% - 7.5% depending on the make and model.
Car loan rates for used cars in Canada are typically higher and currently fall between 8% - 10%.
Car loan interest rates for people with bad credit are higher, because lenders take on more risk. Bad credit auto loan rates are typically between 12.9% – 29.99%.
Most borrowers focus on the prime rate, but lenders use a range of factors to set their rates, with risk assessment and market conditions being among the most important factors.
In general, each lender uses five criteria to set their rates.
Banks and car loan providers assess the risk of lending to an individual based on their credit score, income, employment history and other financial factors. Borrowers with high credit scores and stable financial situations are generally seen as low risk and may be offered low car loan rates.
Car loan providers may offer different interest rates based on the length of the loan term. Most lenders offer their most competitive car loan interest rate with a term that helps them reduce risk and maximize earnings.
Lenders use the prime rate to establish a baseline but may choose to adjust their rates based on the competitive landscape. As a result, a lender may lower their rates to remain competitive or increase rates if they are no longer interested in attracting business for a certain loan type or in a specific region of the country.
Interest rates can also be influenced by broad market conditions, such as inflation, economic growth and government policies. Banks and lenders might adjust interest rates in response to these factors to manage risk and ensure profitability.
The loan amount might also impact the interest rate, with large loans or secured loans potentially offered at lower interest rates.
Knowing how or why car loan interest rates change helps borrowers negotiate with lenders to try to secure lower interest rates. Even in a volatile economic environment, borrowers with a strong credit score and secure financial situation should negotiate.
There are seven main factors that lenders use to assess your application and determine what rate to offer.
| Factor | Description |
|---|---|
| Credit score | Higher credit scores = lower rates |
| Loan term | Shorter loan terms = less interest paid |
| Type of car | New vehicle / preferred make or model = lower rates |
| Income | Stable income = lower rates |
| Debt | Lower debt ratio = lower rates |
| Down payment | Larger down payment = lower rates |
| Type of loan | A fixed-rate loan is typically offered with a higher interest rate |
The following example illustrates how your credit score will influence the rate a lender will offer you and how this impacts the total cost of buying a car. To illustrate, we assume the purchase is for a new vehicle with a purchase price of $26,000 and a loan term of 5 years. These calculations also factor in 13% provincial sales tax and a 20% down payment (of $5,200).
| Credit rating | Credit score | Interest rate | Monthly payment | Total interest paid |
|---|---|---|---|---|
| Excellent | 760 to 900 | 5.39% | $461 | $3,458 |
| Very good | 725 to 759 | 5.99% | $467 | $3,861 |
| Good | 660 to 724 | 6.20% | $470 | $4,003 |
| Fair | 560 to 659 | 9.90% | $513 | $6,574 |
| Poor | 300 to 559 | 14.99% | $575 | $10,327 |
Note: The information above is for illustrative purposes only and does not take into account all of the factors lenders consider when evaluating a loan application. Actual lenders may charge different interest rates.
Use this calculator to find out how much you might pay per month based on varying loan amounts, loan terms and interest rates.
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Data from the Finder: Consumer Sentiment Survey Q3 2023 shows that 8% of respondents plan to take out a car loan in the next three months.
In the Finder: Consumer Sentiment Survey Q2 2023 report, where 1,011 Canadians were asked where they planned to buy their next vehicle, the majority of Canadians confirmed that a used or new car dealership was still the preferred place to purchase their next vehicle. However, a larger number of Canadians are becoming more comfortable with the online car-buying process.
Finding the best rates in Canada involve doing research and comparing lenders. The following tips can help you find a low interest rate on your next car loan—and save you thousands of dollars in the long run.
To get the best car loan interest rates in Canada, you’ll need to have an excellent credit score, enough income to easily manage your loan repayments and a vehicle that is viewed favourably by lenders. Getting a low interest rate allows you to save money over the course of your car loan and ultimately lowers the total price you pay for your car. Compare car loans now.
If you already have a car loan with a high interest rate and think you could qualify for a lower one, you might want to consider auto loan refinancing.
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