Car loan interest rates in Canada

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 7.61%.

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 can expect to pay anywhere between 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.

Compare current car loan interest rates in Canada

Loan provider	Interest rate	Loan term	Eligibility requirements
	0.99% - 46.96% (new and used car loan rate)	3 - 60 months	Min. income of $1,800 /month, 3+ months employed	Go to site
	3.90% - 29.90% (new and used car loan rate)	12 - 96 months	Min. income of $2,000 /month, 3+ months employed	Go to site
	From 8.49% (used car loan rate)	12 - 96 months	3+ months employed, Max.1 bankruptcy, Ontario & Nova Scotia only	Go to site
	3.90% - 29.99% (new and used car loan rate)	12 - 96 months	Min. income of $2,500 /month, employed	Go to site
	4.90% - 29.95% (new and used car loan rate)	3 - 96 months	Min. income of $1,500 /month, 3+ months employed	Go to site
	6.99% - 46.96% (new and used car loan rate)	72 - 84 months	No min. income requirement	Go to site
	From 6.9% (new car loan rate)	1 - 5 years	Not disclosed	Learn more
	7.99% (cars 5 years old or newer)	Up to 5 years	Not disclosed	Learn more
(Newfoundland and Labrador Credit Union)	5.50% - 7.80% (new and used car loan rate)	3 - 8 years for new, 3 - 5 years for used	Not disclosed	Learn more
	6.99% (new car loan rate)	Up to 4 - 8 years depending on the car's year	Not disclosed	Learn more

How car loan interest rates in Canada have changed in the last 3 years

According to Statistics Canada data, the average car loan interest rate has increased from 4.27% in June 2020 to 7.61% in June 2023 — an increase of 3.34 percentage points in three years.

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.

Car loan interest rates in 2023

Given the rapid increase in interest rates in 2022, most car buyers are cautious about the ongoing rising cost for purchasing a new or use vehicle using a car loan in Canada. In 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 and April 12, but it raised the rate by a quarter of a percentage point on June 7 and again on July 12. For new and used vehicle shoppers, this meant an increase in car loan interest rates in Canada.

How many Canadians plan to get a car loan in 2023

Recent data from the Finder: Consumer Sentiment Survey Q2, shows that 15% of respondents plan to take out a car loan in the next three months.

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 7.61%.

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	Starting low rate finance deal (APR)	Vehicle & loan term
Chevrolet	0.99%	2023 Silverado 1500, offer excludes ZR2 and High Country Trims (up to 60 months)
GMC	0.99%	2023 Sierra 1500, offer excludes AT4X, Denali and Denali Ultimate Trims (up to 60 months)
Ford	1.99%	2023 Escape (up to 60 months)
Ford	2.99%	2024 Edge (up to 72 months)
Ford	2.99%	2023 Mustang (up to 72 months)
Mitsubishi	2.99%	2024 and 2023 Eclipse Cross (loan terms not disclosed)
Mitsubishi	2.99%	2023 Mirage (loan terms not disclosed)
Audi	3.48%	2023 A4 (60 months)
Subaru	3.49%	2023 Forester (24 months)
Cadillac	3.49%	2023 CT4 (up to 36 months)
Cadillac	3.49%	2023 CT5 (up to 36 months)
Audi	3.98%	2023 A5 Coupé (60 months)
Audi	3.98%	2023 Q7 (60 months)
Volvo	3.99%	2023 XC90 (60 months)
Volvo	3.99%	2023 XC40 (60 months)

Offers last verified on Sept. 1, 2023 and expire at the end of the month. Offers are on approved credit, vary by region and may have other conditions.

Online brokers

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 at September 1, 2023, TD is showing the following car loan interest rates:

• Toyota Corolla: 8.49% for 24 – 72 months, 8.99% for 84 months and 9.49% for 96 months
• Honda Civic Sedan: 8.49% for 24 – 72 months, 8.99% for 84 months and 9.49% for 96 months
• Chevrolet Bolt EV: 5.99% for 12 – 84 months
• Ford F-150: 8.49% for 12 – 72 months, 8.99% for 84 months, 9.49% for 96 months

Where Canadians plan to buy their new vehicle

In the recent Finder: Consumer Sentiment Tracker 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.

Case study: 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.

Can I get 0% financing on a car loan?

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.
• The loan structure will likely be set in stone.

0% financing on cars

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.

• 1. Know your credit score

  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.

  You can get a copy of your credit report from credit reporting agencies or look up your credit score here.

• 2. Compare car loan interest rates from different lenders

  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.

  Compare car loan options

• 3. Get pre-approved before visiting the car dealership

  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.

• 4. Focus on the overall cost

  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.

• 5. Be willing to negotiate

  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.

• 6. Don't jump on the first deal

  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.

• 7. Check the fine print

  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.

• 8. Apply with a cosigner

  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 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

• What is the current interest rate on a car loan in Canada?

  According to the latest information available from the Bank of Canada, the current average interest rate on a car loan in Canada is 7.61%%.

• Why are car loan interest rates so high in Canada?

  Canada's central bank increased its rate eight times between March 2022 and January 2023, which consequently increased the car loan interest rates that lenders charge their customers.

• When will car rates go down in Canada?

  When car loan rates will go down in Canada is currently unknown. The Bank of Canada's latest rate increase happened on January 25, 2023, and it also announced it would pause rate hikes conditionally. Economists predict that the central bank will not start lowering rates until the end of the year or 2024.