Car Loan Interest Rates in Canada for 2021 | Finder Canada

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Car loan interest rates in Canada

Your credit score, income, vehicle and loan term will help to determine the interest rate that you're offered.

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If you need financing to buy a new or used car, the interest rate that you’re offered will affect how much your loan will cost you – and ultimately how much your car will cost you. You need to be in a strong place financially to qualify for the most competitive interest rates that lenders advertise – and that’s not the only factor to consider when shopping around for the best deal on car loan interest rates.

What is the average car loan interest rate in Canada?

According to Statistics Canada, the average car loan interest rate in Canada is 4.14%. The average buyer can expect to pay anywhere between 4% to 6% interest on their car loan, depending on whether the car is new or used and whether the interest rate is fixed or variable.

Compare current car loan interest rates from online lenders

Name Product Min. Loan Amount Interest Rate Loan Term Min. Credit Score Requirements
Car Loans Canada
$7,500
3.99% to 29.95%
12-84 months
300
Min. income of $2,000 /month, 3+ months employed
Search thousands of vehicles online, including $0 down options, from dealers across the country and get matched with affordable financing options. Auto loans are also available to those with bad credit, consumer proposals and bankruptcies to help rebuild credit.
CarsFast Car Loans
$500
4.90% to 29.90%
12-96 months
300
Min. income of $1,800 /month, 3+ months employed
Browse thousands of vehicles from dealers across Canada and get matched with financing that meets your needs. Apply online to purchase a new or used vehicle and get the vehicle delivered to your door.
Loans Canada Car Loans
$500
0% to 29.99%
3-96 months
300
Min. income of $1,800 /month, 3+ months employed
Get access to financing from multiple lenders across Canada through a single application with Loans Canada. Bad credit, CERB and EI borrowers are considered.
Canadian Auto News
$7,500
4.49% to 29.90%
12-84 months
300
Min. income of $2,000 /month, 3+ months employed
Answer a few simple questions to get matched with affordable financing options. Auto loans are also available to those with bad credit, consumer proposals and bankruptcies to help rebuild credit.
Canada Auto Finance
$500
4.90%-29.95%
3-96 months
300
Min. income of $1,500 /month, 3+ months employed
Canada Auto Finance is a broker that connects borrowers with partnered local lenders. Financing for a new or used car is available for borrowers with bad credit, no credit, CERB, EI or bankruptcy.
Carloans411 Car Loans
$500
1.90% to 19.99%
Up to 72 months
300
Min. income of $1,600 /month, 3+ months employed
Get connected with suitable lenders through CarLoans411. Finance your next car, van or truck with loans available in amounts from $500 to $50,000. Check eligibility for this loan through LoanConnect.
LoanConnect Car Loans
$500
9.90% to 46.96%
3-120 months
550
No min. income requirement
Get access to 25+ lenders through LoanConnect's brokerage. Receive pre-approval in as fast as 60 seconds and get your funds in as little as 24 hours.
Fairstone Secured Personal Loan
$5,000
19.99% to 23.99%
36-120 months
560
Established credit history and own your home
Fairstone offers secured personal loans up to $35,000.
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Note: the information below is just an example and does not take into account all of the factors lenders consider when evaluating a loan application. Actual lenders may charge different interest rates.

Example: Interest on a $36,000 car with a loan term of 7 years

The following example shows the amount of interest you could end up paying for a brand new $36,000 car assuming a loan term of 7 years and a down payment of $3,600.

Credit ratingCredit ScoreInterest Rate
(hypothetical)
Monthly interest
payment
Total interest paid
Excellent760-9003.49%$498.18$4,767.19
Very good725-7593.99%$506.67$5,480.17
Good660-7244.5%$515.42$6,215.11
Fair560-65910%$615.57$14,628.04
Poor300-55915% (there are some lenders that may approve a score under 600)$715.52$23,023.99

Where can I find a car loan with a competitive interest rate?

Comparing car loan interest rates offered by different banks, credit unions and online lenders is critical to finding the deal that’s best for you.

  • Banks or credit unions. Since you have an established relationship with your bank already, it might be easier to get approved for a loan, even if you don’t have the best credit. Banks and credit unions also tend to offer the most competitive rates.
  • Online lenders. Some online lenders may be willing to loan money to people with average or poor credit, even if they can’t get approval from their bank — though they may not get the lowest rate available. Online lenders also tend to be the quickest to approve loans and disburse funds.
  • Dealerships. Local car dealers are often willing to work with borrowers of all credit ratings. But because many dealerships offer financing through an external lender, dealers may inflate interest rates in order to make a profit.

8 tips to get the best car loan interest rates

Finding the best car loan interest rates 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.

Use our car loan monthly payment calculator to find out how much you’d pay in principal and interest

How do lenders come up with my rate?

A few different factors help lenders determine the car loan interest rates you’ll be offered. The more well-rounded your application, the better your chances of scoring a low rate. Although there are many factors that may play a role in your interest rate, these are the four main points lenders consider when reviewing your application:

  • Credit score. Those with higher scores generally have access to lower rates, so improving your credit history is an important part of getting a low interest rate on your car loan.
  • Income. Lenders consider your income because it reflects your ability to pay back the loan. They also want to see a low debt-to-income ratio to make sure you can afford your loan.
  • Loan term. The loan term impacts the interest rate that you’re offered – as well as how much interest you’ll pay over the life of the loan. A lender could offer you a lower interest rate on a longer loan term, but this doesn’t mean you’ll save money: you’ll pay more interest on a longer loan term.
  • Vehicle. Your vehicle’s make and model can also play a role car loan rates, especially if you’re buying a used car. Since it’s possible that your car will be used as collateral to secure the loan, lenders often charge higher interest for cars that are of poorer quality and are more likely to break down.

Bottom line

To get the best car loan rates, you’ll need to have an excellent credit score, a sufficient income that allows you 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 that you pay for your car.

If you already have a car loan with a high interest rate and think you could qualify for a lower one, you may want to consider auto refinancing.

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