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Find out where to get car loans and how to choose the right lender.

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Name Product Min. Loan Amount Interest Rate Loan Term Min. Credit Score Requirements
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.
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.
Coast Capital Car Loan
$10,000
Varies
18-84 months
650
Able to service debt payment of $300/month
Finance or lease both new and used vehicles with competitive rates and flexible terms from one of Canada's largest credit unions. No credit union membership required for this product.
Canadian Auto News
$7,500
3.99% to 29.95%
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.
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.
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.
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 $50,000.
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With so many car loans in the marketplace and different types of lenders, which one should you choose? Read this guide so you can confidently decide which auto loan is right for you.

How does auto financing work?

A car loan is a type of financing used specifically to purchase a new or used car. After buying the car, you’ll make monthly payments of both principal and interest until the loan is fully paid off. Auto loans are usually secured loans — the car itself is used as collateral and can be repossessed if you don’t make payments.

How much you can borrow and what interest rate you get depends on the lender and your personal financial situation. The best way to ensure you’re getting the best deal available to you is to compare offers from multiple lenders before signing on to any car loan.

There are three main components that make up your car loan. They include the following:

  • The principal. This is the total cost of the auto loan, including any fees that the lender or dealership add on for the car loan. In short, this is how much you’re borrowing and need to pay back.
  • The term. This is how long you have to pay off your loan. As a rule of thumb, car loan repayment terms are typically between two and ten years, depending on how much you’re borrowing and how much time it’ll take for you to pay it back. Longer car loans will come with lower monthly payments but you may end up paying more in interest over time. Your best option is to choose a repayment plan that you can stick to with the goal of getting out of debt as quickly as possible.
  • The interest rate. This is the percentage that your lender will charge you to borrow the money for your auto loan. Your car loan interest rate will depend on a series of factors, including your lender’s prime rate, your down payment, your credit score, your income, the terms of your loan and the type of vehicle you want to purchase. If you have a strong credit history and a stable salary, you’re more likely to qualify for a lower interest rate.

Types of auto loans

There are many types of auto loans, which include the following:

Where to get car loans

If you’re shopping for a car loan, you’ll find you have plenty of options to secure auto financing, each with its own merits. Here’s a look at your options:

  • Banks. Your bank most likely offers auto financing or a personal loan you can use to buy a car. Banks offer competitive interest rates, but you will need a good to excellent credit score to qualify.
  • Credit unions. Credit unions car loans also offer some of the most competitive interest rates, but you also need good to excellent credit and may need a membership to access their products.
  • Online lenders. Online car loan providers have more lenient requirements and can offer loans to borrowers with any credit situation, good or bad. They are faster to fund loans than banks and credit unions since their application process is less strict. However, online lenders tend to offer higher interest rates.
  • Online brokers. Online brokers like CarsFast or Loans Canada could be an ideal option if you have bad credit. By filling out one simple application, you can get car loan offers from multiple lenders who want to finance you.
  • Dealerships. You can always try to get financing directly from the dealership, though you might need to become a master negotiator to dodge typical dealership tactics. Dealerships may come with their share of hidden fees you need to pay attention to, but they’re pretty convenient. You can shop for your dream car and secure financing in the same spot.

How much do car loans cost?

When it comes to how much you’ll pay for auto financing, you need to factor in both ongoing costs built into the loan and upfront costs. These are going to include the interest rate, fees, down payment and sales tax.

Upfront costs

First, you’ll want to pay attention to how much you’ll have to pay upfront and in taxes:

  • Down payment. How much you’re expected to put down affects the immediate cost of your car loan. Expect to pay 10% to 20% of the cost of your vehicle upfront. Some lenders offer you the option to apply for a loan without a down payment at all.
  • Sales tax.Sales tax differs between different provinces and territories, so contact Service Canada to find out more about the tax you should expect to pay. Make sure to factor in sales taxes when estimating the cost of your car, as this can add a hefty amount onto the cost, usually between 13-15%.

Ongoing costs

  • Interest rate. The average car loan rate is 4.44%, according to Statistics Canada. The lowest rates hover around 3%, though these are reserved for individuals with excellent credit and a low debt-to-income ratio. Borrowers with poor credit usually see rates in the double digits as high as 19.99% or more.
  • Fees. Some lenders charge an origination fee of 1% to 5% of the loan amount. An origination fee is a fee to process your loan and is deducted from the loan amount.

Your APR, or annual percentage rate, is a combination of your interest rate and financing fees, providing you with the total sum you’re borrowing. It shows you the true cost of your car loan.

In addition to APR, the length of your loan term also affects the overall cost. Your loan term is the amount of time you have to pay off your loan. A short loan term generally results in higher monthly payments, but a lower total loan cost. A longer loan term gives you lower monthly payments, though you’ll ultimately pay more in interest.

Don’t forget to ask about any rebates you might be eligible for

If you’re financing with a dealer, ask about any cashback discounts to avoid leaving money on the table. Three main types include cash rebates, low-interest dealership financing and special leases. Government rebates for low-emission or hybrid vehicles are also available in many states.

How is APR calculated?

Typically, your APR is determined by a number of factors, including the following:

  • The amount you need to borrow. The more you need to borrow, the higher your interest rate may be.
  • Your down payment. If you have a large down payment, this can lower your interest rate because you’re asking for less from your lender.
  • The length of your term. The faster it will take you to pay off your loan, the lower your interest rate may be. Loan terms can vary from as short as 2 years to as long as 8 to 10 years.
  • Your credit score. Your credit score plays a massive role in determining your interest rate. If you have a great credit score, you appear as more trustworthy to lenders while less-than-perfect credit will earn you a lower interest rate.
  • Your income. Lenders will look at your income to decide on your ability to repay your loan. If you have a good, stable income, you may qualify for a loan with better terms.
  • The type of car you’re financing. You will yield a lower interest rate if you’re shopping for a used car versus a brand new, luxury car, for example.

Keep in mind, there are two types of interest calculations on a car loan:

  • Simple interest, which is only charged on the original amount you’re borrowing to finance your car purchase.
  • Compound interest, which is calculated with both your principal and the interest that’s adding up since the start of your loan.

Before you sign on the dotted line for your car loan, take a closer look at the interest rate as an APR. The APR factors in the total amount you’re repaying, including your interest that’s compounded over your loan term, your fees and any other charges you’re on the hook for. Ultimately, this is the total cost of your auto loan.

If you’re doing your homework on car loans, you can use our calculator below as a resource to help you figure how much a potential loan may cost overall.

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What about 0% APR financing?

Some dealerships offer interest-free financing, but it’s not always easy to get and it may be an introductory promotion to move cars off the lot. Keep these drawbacks in mind before signing on to 0% APR financing:

  • It’s a marketing tool. Generally, interest-free financing is a marketing tool that manufacturers use to bring in customers.
  • Set as an introductory rate. More often than not, 0% interest is a temporary rate that lasts for about a year before the regular interest rate kicks in. If you qualify and agree to these terms, check to see how long-lasting the interest rate is and what it will change to after the promotion ends.
  • Not everyone is eligible. You need to meet tough credit and income standards to qualify — only around 10% of applicants actually qualify for the 0% rate.
  • Higher monthly payments. These loans tend to be shorter — often no more than 36 months — translating into high monthly payments.
  • Less room to negotiate. This type of financing tends to come with a fixed price, and you often can’t qualify for a cashback rebate.
  • Your deal might be canceled. You might have to pay full interest if you miss just one payment.

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How to find the best car loans

Before you compare lenders for car loans, calculate how much you can afford to pay for a down payment, monthly repayments, any fees and your loan’s overall cost. Look up the taxes and fees associated with purchasing a car in your province or territory, and add them to the cost of each car you consider.

Banks, credit unions and online lenders often ask borrowers to choose a car before applying. Matching services and dealerships, on the other hand, usually ask you to come with an open mind. Regardless of where you apply, narrow down the makes and models of different cars in order to get an idea of the type of car you can afford.

To get the best car loan, ask yourself these 10 questions:

Click on each question to expand more information about what to look for.

You’ll find that some of this information isn’t readily available online for loan-matching services and dealerships. In those cases, it’s worth taking a look at reviews, forums or calling a customer service line to get a ballpark answer.

4 red flags when looking for financing

Lenders or dealerships advertising any of these “perks” should ring the alarm bells – or at least prompt deeper research.

  • There’s no credit check. Dealerships often don’t run a credit check for buy-here-pay-here loans, but other types of loan usually require a credit check. Direct lenders advertising no credit check could be a scam.
  • It lets you take your car home before approval. This could be the sign of a “spot delivery scam,” where a dealer calls a few days later to announce that financing fell through and you now need to renegotiate your loan at a much higher price.
  • It lies about your credit score. Some dealerships con borrowers into paying higher interest by telling them their credit score is worse than it actually is. Yet another reason to check your credit report, and know what that number means, before comparing lenders.
  • It offers 0% financing. You may not pay an APR on your car loan, but you typically aren’t able to negotiate your price or take advantage of rebates. Loan terms also tend to be shorter, sometimes to the point of being unaffordable. Be very careful with this option, as it’s usually offered quite frequently.

Common car loan scams

Should I lease, finance or buy a car with cash?

Deciding on whether to buy, finance or lease your car is a personal decision. There are no right or wrong answers, but here’s what to consider as you wade through these important decisions:

  • Why leasing works. Leasing, in a nutshell, is like renting a car long-term for about two to four years. You’ll make lease payments but once your term is up, you can return the car and walk away scot-free or buy out the lease if you decide to keep the vehicle. It’s a great option if you prefer a lower monthly payment because financing comes with a higher price tag. It’s also a plum opportunity to test drive brand new cars for a few years before deciding on what features you like for a car you want to purchase for the long haul. Keep in mind though, when you lease a car, it isn’t yours. You have to stick to certain parameters including a maximum mileage and keeping the car in good condition upon return.
  • Why financing works. With financing, your car is all yours. This means limitations are thrown out the door: you can drive up the mileage as much as you like, and you can make customizations to your vehicle to suit your tastes. Once you pay off your auto loan, the car is all yours without any more expenses aside from gas and regular maintenance. It’s an asset to your name, and if you stay on top of your loan payments over the years, your credit score will get a boost too.
  • Why buying your car outright works. This is the hardest option of the trio to maneuver. You must have the liquid cash in your bank account to pay for your car upfront. If you can make this happen, there are some perks. For starters, you have more negotiating power with your dealership to secure a discount. And here’s the big one: you won’t have any monthly payments to worry about, you won’t have to shop around with lenders to secure a loan and you have an outright asset to your name. You also won’t have to worry about a car loan tampering with your debt-to-income ratio.

Is a car loan or a personal loan better?

Both personal loans and car loans can be used to finance a new or used car. Your choice should be based on your needs, your expectations for the future and the car you’re looking to buy. But no matter which you choose, carefully read the terms and conditions attached to each loan to decide if it’s right for you. Not all car loans are equal, and the terms of personal loans can vary widely.

Make sure you compare loans side by side and play around with an online calculator before you decide. Here are a few questions to keep in mind:

  • Are you expecting your financial situation to change? If you’re anticipating a change in your financial situation, there’s a good chance an unsecured personal loan is a better choice. Even if you lose your income and default, your car won’t be used as collateral – meaning it won’t be repossessed. Remember, with auto loans, your car is used as collateral.
  • Are you buying a used car? Buying used instead of new can be an effective way of saving money, but you might not be able to find a used car loan for the car you want – especially if it’s an older model or has over 100,000 miles – and might have to take out a personal loan instead.
  • Do you have bad credit? While having bad credit may make it harder to secure a loan, there are still bad credit car loans available. These tend to be a better deal than personal loans. This is because your car acts as collateral for the loan, giving you access to lower interest rates.

What do I need to know before I apply for car loans?

Here’s the information you should have about your finances, the lender and the car loans you’re considering before you apply.

  • Your budget. Before you compare lenders, calculate now how much you can afford for a down payment and monthly repayments, factoring in all of the fees and your loan’s overall cost. Make sure you look into the required taxes and fees in your province or territory too.
  • Rates and fees. Ideally, you’ll have done your research and compared rates and fees with multiple lenders. Make sure you understand how each lender breaks down your APR because some will charge an origination fee while others will have a separate slate of charges.
  • Your terms. In addition to APR, the length of your loan term also affects the overall cost. Your loan term is the amount of time you have to pay off your loan. A short loan term results in higher monthly payments, but a lower total loan cost. A longer loan term gives you lower monthly payments, though you’ll ultimately pay more in interest. Based on your budget, you’ll have a rough idea of how much you can afford to pay each month and how long it’ll take you to realistically pay off your loan.
  • What kind of car you’d like to buy. Lenders will ask you outright how much you’d like to borrow, and some may even ask you to zero in on precisely the car you want to ensure their partner dealerships have it on hand. It’s also important to know what you want so that you aren’t persuaded to take out a higher loan to buy something more expensive.
  • Eligibility requirements. Before proceeding, get your ducks in a row by making sure you meet your shortlist of lenders’ eligibility requirements. Know your credit score. Make sure you have documentation on hand to prove your income, via bank statements, for example.
  • Available rebates. If you’re financing with a dealer, ask about any cashback discounts to avoid leaving money on the table. Three main types include cash rebates, low-interest dealership financing and special leases. Government rebates for low-emission or hybrid vehicles are also available in some provinces.
  • Lender repayment policies. Find out if you’ll be able to repay your car loan early without penalty or if you can make additional payments without being charged a fee. These features can save you money if you plan on paying the loan off ahead of time.

I’m ready to apply. What do I need to do?

The car loan application process can vary wildly depending on the type of financing you choose. Getting financing from a dealership doesn’t involve most of the steps outlined below, for example – instead, you start at the dealership.

What documents do I need?

Most lenders ask to see at least three documents when you apply for a car loan:

  • Your driver’s licence. Your lender might ask to see your licence or require your licence number. Either way, have it on hand.
  • Your insurance card. Some lenders require you to have specific car insurance before applying for a loan.
  • Employment verification. You might be asked to submit tax returns, bank statements or recent pay stubs to prove you make enough to afford your car loan.

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I got my car loan. What happens next?

So, you’ve finalized the deal that got you behind the driver’s seat. Now it’s time to start paying off your car loan. With many lenders, you can set up automatic payments so you don’t forget to pay. Some even offer a discount on your interest rate for signing up for automatic repayments.

Keep track of your personal account and loan balance to make sure everything goes smoothly – sometimes even automated systems make mistakes. Contact customer service if you notice anything off.

Before signing your loan contract, find out if you can make early repayments without incurring additional fees by contacting your lender directly.

Loans for other types of vehicles

  • RV loans. RVs can cost as little as $10,000 up to $150,000 or more depending on the size and model. Financing for an RV is typically long-term over the course of 12 months up to 10 years. Some RV loans come with a fixed interest rate so your monthly repayments will be the same every month. Other loans have a variable interest rate, which means your repayments may fluctuate, but the rate tends to be lower. Learn more about RV loans.
  • ATV loans. ATVs can cost as little as $3,000 up to $18,000 or more depending on the model. ATV loans usually don’t need a down payment. You can finance an ATV through a manufacturer, dealer or lender. Learn more about ATV loans.
  • Motorcycle loans. Motorcycles, just like RVs, have a wide price range. You can get a motorcycle for as low as $6,000 up to $50,000 or more. You can finance a motorcycle through a manufacturer, dealer or lender. Learn more about motorcycle loans.
  • Truck loans. Depending on whether it’s for commercial or non-commercial use, there are several lenders that offer truck financing. Truck prices can also vary widely. It can be as little as $20,000 and all the way up to over $150,000. Learn more about truck loans.

Frequently asked questions

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    Since July 2016, Canada has owed on average $2.8 billion per year in car loans, with lenders advancing $4.1 billion in July of 2020. Find out more about the state of car loans in Canada.

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    Canadian Auto News matches you with local lenders and dealerships to help you find the perfect car and car financing for your needs.

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    Canada Drives simplifies the process of buying a car, showing you how much you can borrow along with a list of vehicles you’ve already qualified for based on your approved financing.

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