Buying a new or used vehicle often requires getting a loan. The car loan interest rate will have a direct impact on the overall cost of your auto loan – and ultimately how much a vehicle will cost you.
While getting the lowest car financing rate is ideal, not all borrowers will qualify for the competitively low rates advertised by traditional car loan lenders. To find a competitive car loan interest rate, it pays to shop around and to 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.
What is the average car loan interest rate in Canada?
According to Statistics Canada, the average car loan interest rate in Canada is 8.24%.
Did you know?
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 will increase car loan rates to maintain their profitability. When the prime rate goes down, lenders will lower their auto financing rates, to remain competitive and attract borrowers.
The average buyer may pay around 6.7% and 9% interest on their car loan, depending on whether the car is new or used, their credit score, the purchase price of the car and whether the loan is based on a fixed or variable interest rate.
How car loan interest rates in Canada have changed recently
According to Statistics Canada data, the average car loan interest rate has increased from 4.94% in December 2019 to 8.21% in December 2023 — an increase of 3.27 percentage points in just four years. Although rates dropped briefly during the pandemic, they rose sharply afterwards. However, by the end of 2023 and now into 2024, average car loan rates appear to be leveling off.
Month
Average car loan rate
January 2024
8.24%
December 2023
8.21%
November 2023
8.33%
October 2023
8.19%
September 2023
8.12%
August 2023
8.01%
July 2023
7.87%
June 2023
7.60%
May 2023
7.65%
April 2023
7.69%
March 2023
7.65%
February 2023
7.83%
January 2023
8.03%
The rise of car loan interest rates
In 2022, car loan interest rates in Canada increased in tandem with the rate increases applied to each lender’s prime rate. As result, the average car loan rate increased rapidly in 2022, increasing by 2.80 percentage points by the end of the year. In comparison, the average car loan interest rate increase was only half a percentage point between 2017 and 2021 — with a 0.91 percentage point drop in the average car loan interest rate in 2020 alone. In 2023, the average car loan rate increased by a more modest 0.18 percentage points.
Car loan interest rates in 2023 and 2024
Given the rapid increase in interest rates in 2022, most car buyers are cautious about the ongoing rising cost for purchasing a new or used vehicle using a car loan in Canada. On January 25, 2023, Canada’s central bank again raised rates, but this time it came with a message: Rate hikes would be paused, in the near future, to assess the impact of the rapid rate hikes over the last 12 months.
The BoC held steady in the rate announcements on March 8, 2023 and April 12, but it raised the rate by a quarter of a percentage point on June 7 and again on July 12. That rate was then held throughout the fall of 2023.
On January 24, 2024, the BoC held the rate steady yet again, and stated that inflation rates are expected to slowly decrease and reach central bank targets in 2025.
For new and used vehicle shoppers, this means car loan interest in Canada may stay steady or go down for the remainder of 2024.
To help keep costs low, Canadians will need to compare the car loans from various lenders, in order to find an auto loan with a good interest rate and competitive terms.
What is a good interest rate on a car loan in Canada?
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 car loan 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 or near the current national average car loan rate of 8.24%.
New car loan rates
If you have good credit, then new car loan rates are typically 0% - 7.5% depending on the make and model.
Used car loan rates
Used car loan rates in Canada are typically higher, and currently fall between 8% - 10%.
Bad credit car loan rates
Car loans for bad credit are higher because lenders take on more risk. Bad credit auto loan rates are typically between 14% – 29.99%.
Where can I find the best car loan rates in Canada?
You can often find competitive car loan interest rates in Canada from the following providers:
Dealerships
Dealers usually have an incentive to offer the best car loan rates in Canada because they want you to buy a car from them. Dealers provide in-house financing and/or are partnered with multiple lenders, including the big banks. However, you may want to get car loan pre-approval first before you visit a dealership so you have more negotiating power.
Car loan interest rates from popular car brands in Canada
Car manufacturers in Canada offer their own financing programs. Keep in mind that some car brand offers are based on region, and that you may not qualify for a manufacturer’s advertised car loan interest rates because of factors like your credit score and income.
Brand
Lowest-rate finance deal (APR)
Vehicle & loan term
Ford
0%
2023 F-150 Lightning, on select models (up to 72 months)
GMC
0%
2023 Sierra 1500, on Pro and Elevation models (up to 60 months)
Chevrolet
0%
2024 Silverado 1500, on select trims (up to 60 months)
Cadillac
0.99%
2024 CT4 (up to 36 months)
Cadillac
0.99%
2024 CT5 (up to 36 months)
Subaru
1.49%
2023 Solterra (24 months)
Jeep
2.99%
2023 Grand Cherokee 4xe PHEV Overland (72 months)
Mitsubishi
2.99%
2024 Eclipse Cross (select terms)
Mitsubishi
2.99%
2024 Mirage (select terms)
Volkswagen
2.99%
2024 ID.4 (36 months)
Subaru
3.49%
2024 Impreza (24 months)
Chevrolet
3.99%
2024 Malibu (up to 48 months)
Ford
3.99%
2024 Edge (up to 72 months)
GMC
3.99%
2024 Terrain (84 months)
Hyundai
3.99%
2024 Kona (select terms)
Offers last verified on Apr. 2, 2024 and expire on Apr. 30, 2024 (where an expiration date is disclosed). Mitsubishi offers expire on Jul. 2, 2024. Offers are on approved credit, vary by region and may have other conditions.
If you have a credit score below 660 and need help finding car loans for low credit scores, you may wish to apply to an online broker that specializes in finding a car loan for borrowers like you. Online brokers are partnered with hundreds of dealers and can match you with multiple car loan rate offers. Be prepared for higher interest rates though, because lenders view borrowers with fair or bad credit as higher risk. Compare online car loan options above.
Banks and credit unions
While financial institutions do not have an incentive to sell you a car, they may still offer competitive interest rates. When weighing your bank or credit union options, check if their auto loan is secured or unsecured. Most auto loans from traditional lenders, like banks, are secured loans as these generally offer borrowers lower car loan interest rates.
A good place to start is online. The first option is to search for the bank page directly. For example, search “TD car loan rates” to find specific car loan rates offered by TD. Do this for every bank and credit union to get a list of the most competitive car loan rates.
Another option is to search for a bank’s car loan calculator. For instance, a CIBC customer should check out the CIBC car loan calculator to get an idea of current CIBC auto loan rates and terms. All big five banks offer a car loan calculator that also lets you examine their most competitive auto loan rates.
What are the bank car loan interest rates?
Banks do not disclose their car loan interest rates on their websites. However, to get an idea of bank car loan interest rates, download the TD Wheels app, which lets you browse new cars and financing offers. As of April 2, 2024, TD is showing the following car loan interest rates:
2024 Toyota Corolla: 8.99% for 24 – 96 months
2024 Honda Civic Sedan: 8.99% for 24 – 96 months
2024 Chevrolet Malibu: 3.99% for 12 – 48 months, 5.49% for 60 – 84 months
2024 Cadillac CT4: 4.99% for 12 – 72 months, 5.49% for 84 months
2024 BMW 3 Series 330e Plug-In Hybrid: 8.99% for 12 – 96 months
2023 Chrysler 300: 2.99% for 36 months, 4.49% for 48 months, 4.99% for 60 months, 5.29% for 72 months, 6.49% for 84 – 96 months
Where Canadians plan to buy their new vehicle
In the recent 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.
How are car loan interest rates calculated?
Most borrowers focus on the prime rate, but lenders use a range of factors to set their car loan interest rates, with risk assessment and market conditions being among the most important factors.
In general, each lender will use five criteria to set their car loan interest rates:
Risk assessment: Banks and car loan lenders assess the risk of lending to an individual based on their credit score, income, employment history, and other financial factors. Borrowers with higher credit scores and more stable financial situations are generally seen as lower risk and may be offered lower car loan interest rates.
Loan term: Car loan lenders may offer different interest rates based on the length of the loan term. Most lender will offer their most competitive car loan interest rate with a term that helps them reduce risk and maximize earnings.
Competitive landscape: Lenders will use the prime rate to establish a baseline but may choose to adjust their car loan interest 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.
Market conditions: Interest rates can also be influenced by broader market conditions, such as inflation, economic growth, and government policies. Banks and lenders may adjust their interest rates in response to these factors to manage their own risks and ensure profitability.
Loan amount: The loan amount may also impact the interest rate, with larger loans or secured loans offered at potentially lower interest rates.
Knowing how or why car loan interest rates change helps borrowers to 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.
Factors that impact car loan interest rates
There are seven main factors that lenders will use to assess your application and to determine what car loan interest rate to offer.
Factor
Description
Credit score
Higher credit scores = lower car loan interest rates
Loan term
Shorter loan terms = less interest paid
Type of car
New vehicle / Preferred make or model = lower car loan interest rates
Income
Stable income = lower car loan interest rates
Debt
Lower debt ratios = lower car loan interest rates
Down payment
Larger down payments = lower car loan interest rates
Type of loan
A fixed-rate loan is typically offered at a higher interest rate
Credit score. Those with higher scores generally have access to lower car loan rates, so improving your credit history is an important part of getting a low interest rate on your car loan.
Loan term. Car loan terms can range from two to eight years or more. The loan term impacts the interest rate that you’re offered and the total cost of the loan. In general, shorter loan terms will correspond with lower car loan interest rates. That’s because lenders see longer loan terms as more risky. Even if a lender does offer you a lower interest rate on a longer loan term, you won’t necessarily save money since you’ll pay more interest over time.
Type of 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.
Income and debt ratios. 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. Online lenders typically require a minimum monthly income between $1,500 and $2,200 to qualify for a car loan. Of course, you’ll have a greater chance of being approved and may be offered lower interest rates if your income is higher.
Type of loan. Banks and credit unions can offer fixed and variable interest rates on a car loan. Generally, variable-rate car loans have lower starting rates than fixed-rate car loans.
Example: Impact of credit score on car loan interest rates
The following example illustrates how your credit score will influence what car loan interest rate a lender will offer you, and how this will impact 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 five 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.
Car loan calculator: How car loan interest rates impact your total cost
The cost of your auto loan will depend on your loan amount, car loan interest rate and loan term. You can use this car loan payment calculator to find out how these factors affect your monthly payments and total interest charged.
Car loan monthly calculator
Calculate how much you could expect to pay each month
You may see dealerships advertising 0% financing on their cars. With 0% financing, you buy the car at the agreed-on price, and then make payments on the principal of the car with no interest for a number of months. However, keep these points in mind:
0% interest may only be offered for part of the loan term.
To be approved, you’ll need spectacular credit (usually above 700).
Negotiating the car price will be difficult.
0% interest car financing is only available for certain models.
You may not get as much money for your trade-in vehicle.
8 tips to get the best car loan interest rates in Canada
Finding the best car loan 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.
Before you start comparing car loan interest rates in Canada, understand your credit score and how it impacts your finances. If you have multiple accounts open and have a high debt-to-income ratio (you owe a lot more than you have), then your application will look less favourable to lenders. On the other hand, if you have a clean record and an excellent score, you’ll want to be on the lookout for deals with especially low car loan interest rates. Go into the car-buying process with your eyes open and a realistic goal in mind.
Some lenders allow you to get pre-approved for a car loan so you know what interest rate and loan term you qualify for. Pre-qualifying doesn’t damage your credit score, as usually lenders just conduct a “soft pull” instead of a “hard pull” which can lower your score by a few points. You can therefore apply for pre-approval from multiple lenders without committing to multiple loans and damaging your credit score. This makes it easier to compare rates and find a loan that’s suitable for your needs.
When you compare your options ahead of time, you’ll have an idea of the car loan interest rates you’re eligible for. This means you’ll have a solid number to negotiate a lower APR when you visit a dealership that offers financing. If you prefer not to deal with the stress of negotiating with a dealership, you can buy a car online.
Many buyers visit the dealership with an idea of their monthly car payment. While this is great for your budget, it can lead to salespeople inflating the price of your car, usually by offering you a longer loan term — which mean you’ll be paying more in interest. Your focus should be on the overall cost of the vehicle, that is, the sale price as well as the total amount of money you’ll have paid throughout the entire term of your loan. Once you have this number, it’s much easier to determine what term length is best so you can handle monthly repayments.
If you decide to visit a car dealership without knowing what car loan interest rates you’re eligible for, you’ll need to negotiate your interest and the price of the car. No matter how good your credit score is, you likely won’t be offered the lowest interest rate right off the bat. Dealerships are hoping you don’t question your rate, so come prepared knowing your credit score and the average car loan interest rates currently offered on the market.
After researching, price shopping and comparing lenders, it might be tempting to take the first good car loan interest rate that comes your way. Stay patient. Since your interest rate isn’t the only thing that impacts the final price of your car, spend the time determining how term length and vehicle cost affect your budget. Most lenders will offer you a few days to consider your options — you won’t be wasting time if you decide to take a moment to get your thoughts in order. And you might save a lot of money in doing so.
Like most loans, car loan contracts are notorious for their difficult-to-understand terminology. You should know how interest is calculated on your loan and any potential fees you might have to pay. You’ll also want to confirm that your loan isn’t conditional when you visit a dealer. Conditional means “subject to change”, meaning your loan isn’t finalized when you drive off the lot. Your terms could change, which could leave you with a worse interest rate on a loan that you thought you had gotten a good deal on.
Lenders may require that poor credit applicants apply with a cosigner, because the cosigner acts as a guarantee for the loan — if you’re unable to make your payments, your cosigner is responsible. This not only lowers the risk for the lender, but it can also result in a lower interest rate for you.
Even applicants with decent credit can benefit from having a cosigner or joint application. The lender considers the credit and income of both parties when reviewing your application, giving you a better chance of being approved for a more affordable rate. In order for this to happen, your cosigner has to at least meet, if not exceed, the lender’s eligibility criteria.
Survey methodology
The results of the Finder: Consumer Sentiment Survey Q3 (CSTQ3) were collected through an online Pollfish survey conducted between August 10 to 21, 2023. In the survey, 1,013 Canadians from across the country were asked about their current debt obligations, among other questions regarding money goals and financial confidence. The estimated margin of error for the survey is +/- 3%, 90% of the time.
The results of the Finder: Consumer Sentiment Survey Q2 were collected through an online Pollfish survey conducted between April 27 and April 29, 2023. In the survey, 1,011 Canadians from across the country were asked about their opinions and plans regarding the purchase of a vehicle and the use of vehicle financing. The estimated margin of error for the survey is +/- 3%, 19 out of 20 times.
Bottom line
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 that 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 may want to consider auto loan refinancing.
Frequently asked questions about car loan rates
According to the latest information available from the Bank of Canada, the current average interest rate on a car loan in Canada is 8.24%.
Canada's central bank increased its rate in 2022 and 2023, which consequently increased the car loan interest rates that lenders charge their customers.
When car loan rates will go down in Canada is currently unknown.
Romana King is the Canada Group Editor at Finder and a personal finance expert. As an award-winning personal finance writer and real estate expert, she has spent almost two decades helping Canadians make smarter money management decisions. Her first book, House Poor No More: 9 Steps That Grow the Value of Your Home and Net Worth, launched in November 2021, continues to be an Amazon bestseller and won the Excellence in Financial Journalism Book Award in 2022.
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