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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.
Based on the latest information available from the Bank of Canada, the average car loan interest rate in Canada is 7.89%.
The average buyer can expect to pay anywhere between 6% 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 loan is based on a fixed or variable interest rate.
| Loan provider | Interest rate | Loan term | Eligibility requirements | |
|---|---|---|---|---|
 | 0% - 31.99% | 24 - 120 months | Min. income of $1,800 /month, 3+ months employed | Go to site |
 | 1.49% - 31.99% | 12 - 96 months | Min. income of $1,900 , 3+ months employed | Go to site |
 | 4.90% - 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 |
 | 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 |
 | 9.90% - 31.00% (used car loan rate) | 24 - 84 months | Min. income of $2,200 /month, 3+ months employed | Go to site |
 | 4.99% - 46.96% (used car loan rate) | 72 - 84 months | No min. income requirement | Go to site |
 | 4.75% - 29.99% (used car loan rate) | 12 - 84 months | Min. income of $1,800 /month | |
 | From 6.99% (used car loan rate) | 24 - 84 months | Not disclosed | Read review |
 | 4.30% - 9.19% (new or hybrid cars) | 1 - 5 years | Not disclosed | Learn more |
 | 7.49% (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 and used car loan rate) | Up to 4 - 8 years depending on the car's year | Not disclosed | Learn more |
According to Statistics Canada data, the average car loan interest rate has increased from 3.76% in July 2016 to 7.89% in December 2022 — an increase of 4.13% in just over five years.
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% by the end of the year. In comparison, the average car loan interest rate increase was only 0.5% between 2017 and 2021 — with an almost 100 basis point (0.91%) drop in the average car loan interest rate in 2020 alone.
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. As of 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.
For Canadians interested in buying a vehicle in 2023, this doesn’t mean the BoC will start to lower rates anytime soon. In fact, most Canadian economists are predicting a reduction in prime lending rates to start at the end of 2023 or begin in early 2024. For new and used vehicle shoppers, this means car loan interest rates in Canada will remain relatively unchanged in 2023.
According to the Finder: Consumer Sentiment Tracker, where Canadians were asked about their financial plans for 2023, more Canadians plan to take out a car loan in the first quarter of 2023, than in 2022 — 12% compared to 9%, respectively. However, the need to use a car loan to purchase a vehicle differs from region to region in Canada.
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.
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 7.89%.
If you have good credit, than new car loan rates are typically 0% - 7.5% depending on the make and model.
Used car loan rates in Canada are typically higher, and currently fall between 8% - 10%.
You can often find competitive car loan interest rates in Canada from the following providers:
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 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.
| Car brand | Low rate finance deal | Vehicle & loan term |
|---|---|---|
| Chevrolet | 1.49% | 2022 Silverado 1500 (72-month loan term) |
| Subaru | 1.49% | 2022 Ascent (24-month loan term) |
| GMC | 1.49% | 2022 Sierra 1500 (72-month loan term) |
| Ford | 1.99% | 2022 F-150 (72-month loan term) |
| Nissan | 1.99% | 2022 Armada (24-month loan term) |
| Buick | 2.99% | 2023 Encore GX and 2023 Enclave (60-month loan term) |
| Volvo | 3.99% | 2023 XC90, XC60 and XC40 (60-month loan term) |
| Audi | 4.48% | 2023 A4 (60-month loan term) |
| Ram | 4.59% | 2023 Ram 1500 (96-month loan term) |
| Cadillac | 4.99% | Several 2023 models (84-month loan term) |
Offers last verified in Feb. 1, 2023.
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.
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.
In the recent Finder: Consumer Sentiment Tracker Q1 2023 report, where more than 1,850 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.
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.
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 |
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.
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.
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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:
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.
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.
Read our guide to the latest finance offers from car brands in Canada.
Fluctuating rates mean you’re taking a gamble on the market.
Know what your repayments will be for the duration of your loan term with a fixed rate car loan. With a secured loan you can find competitive rates and lock them in at the beginning, keeping them low while you make ongoing repayments.
Learn the ins and outs of these promotions, the pros and cons, plus tips to make the most of your financing.