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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.
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.
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.
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 rating||Credit Score||Interest Rate|
|Total interest paid|
|Poor||300-559||15% (there are some lenders that may approve a score under 600)||$715.52||$23,023.99|
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.
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.
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:
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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Need a car loan to finance your new set of wheels? Compare the best car loans here to get on the road faster with more money in your pocket.
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