Finder is committed to editorial independence. While we receive compensation when you click links to partners, they do not influence our content.

Compare low interest rate car loans

Keep your repayments down with a low interest rate car loan.

You don’t have to spend big to get help with buying a car. When you’re choosing a loan, your best options is the provider that gives you the lowest interest rate. It pays to compare multiple lenders like banks, credit unions and private lenders. Keep reading to find out how to get the lowest interest rate loan for your new or used car.

5 tips to get a low interest rate on a car loan

Low-Interest rates are usually reserved for those with good credit and a regular income. Here are five tips for finding the lowest rates possible for your next car loan.

What’s considered a low interest rate on a car loan?

Generally, the lowest interest rates you can find on a car loan are around 2% or 3%. However, any car loan with a rate under 5% is considered low-interest — and you’ll need good or excellent credit to qualify.

However, if you have less-than-stellar credit, the lowest rate you can get could be upwards of 10%. Since car loans are usually secured, they typically come with lower rates than an unsecured personal loan.

Who Actually qualifies for the lowest Rate?

Just because you see a particular lender advertising a low-interest rate for a car loan, don’t automatically think that’s how much you’ll end up paying. Those ultra-cheap interest rates may only be available to you if you have excellent credit or if you are buying a certain type of car.

How much does a low interest rate car loan cost?

Low interest car loans come with a few costs, but each individual loan will differ depending on the lender you apply to.

Here’s are some fees to watch out for:

  • The origination fee. This is the cost to set up your car loan. Lenders usually add this fee into your loan amount to be paid off with the rest of your principal.
  • Other monthly fees. Some loans could have maintenance fees to keep your account open.
  • Early or additional repayment fees. If you repay your loan early or make additional payments you may be charged a fee to make up for the loss of interest on your loan.
  • Late payment fees. Set up a pre-authorized payment to avoid fees for late or missed payments.

Consider your loan term

How much your car loan costs also depends on how long you take to pay it back. For lenders, longer terms are better because there’s more time for interest to accumulate on the loan.

Let’s assume you want to borrow $20,000. Over a 5-year term you might be quoted an 8% interest rate, but you’re offered a 7.5% rate if you accept a 7-year loan term. Let’s see how that would work out.

Low interest loan details8% interest rate7.5% interest rate
Loan amount
Loan term
5 years
7 years
Monthly payment
Total interest paid

If you choose to pay a 7.5% interest rate over 7 years, your payments would be almost $100 cheaper per month. This might seem appealing because it’s more friendly to a monthly budget. Unfortunately, even though the interest rate is cheaper, you’d end up paying $1,436 more in additional interest charges than if you had chosen to pay an 8% interest rate over 5 years.

You could always make additional payments and pay off your car loan sooner. But if you want to do this, check to see if you’ll be charged an early repayment fee that could wipe out any savings you thought you were getting.

Personal loan calculator: how much are you eligible for?

Types of low interest car loans

Compare car loans

Name Product Min. Loan Amount Interest Rate Loan Term Min. Credit Score Requirements
Loans Canada Car Loans
0% to 29.99%
3-96 months
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.
CarsFast Car Loans
4.90% to 29.90%
12-96 months
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.
Coast Capital Car Loan
18-84 months
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
3.99% to 29.95%
12-84 months
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.
Car Loans Canada
3.99% to 29.95%
12-84 months
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.
Canada Auto Finance
3-96 months
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
1.90% to 19.99%
Up to 72 months
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.

Compare up to 4 providers

What factors influence interest rates?

Buying a brand new car might get you a lower interest rate, but a new car might not be what you need — or what you can afford. Here are some factors that can influence the interest rate you pay, even for a simple, inexpensive car.

  • Secured or unsecured loan. These loans are cheaper than unsecured loans because your car is used as security (or collateral) for the loan.
  • Fixed or variable interest rate. Variable rate loans can potentially be cheaper than fixed rate loans because variable interest rates are based on the prime lending rate, which can change periodically. However, if the prime rate increases enough, it may actually bump variable interest rates above fixed interest rates. If you’re willing to take the gamble, then you might want to go for a variable interest rate in the hopes of paying less. Otherwise, you may decide that a fixed interest rate is the safer way to go.
  • Age of the car. This determines the type of low interest car loan you’re eligible for. When it comes to used cars, some lenders won’t approve loans for cars that are 10+ years old or that have too many miles on them. Cars older than 20 years may need to be bought with a personal loan instead.
  • The loan term length. Calculate your monthly payments over three-year, five-year and seven-year terms to make sure you can keep up with the payments. Bear in mind that with longer terms, you’ll pay more in interest.
  • Employment status. If you have a stable employment history and can show documentation verifying your income, you can typically qualify for a low interest rate car loan. However, if you can’t verify any particular source of income (say, if you’re self-employed and have not kept good employment records), you might end up paying a slightly higher interest rate.
  • Your credit history. If you have a poor credit history, it’s likely you won’t qualify for those really attractive, publicly-advertised interest rates. Your search for car loans may be limited to higher interest rate options until you can improve your score.
  • If brokerage fees are charged. If you’re getting a car loan through a broker or car dealership, you might be expected to pay brokerage fees. Brokers generally charge either a percentage-based fee or a flat-rate free that can range from $200-$500.

Bottom line

The best loan for you will be the one offered with the lowest interest rate and minimal additional costs. Check what fees your lenders are charging you and ask for these fees to be reduced. If you can’t get them reduced, shop around for a more competitive deal and always compare your car loan options before you apply.

Learn more about getting a car loan

Frequently asked questions

More guides on Finder

Ask an Expert

You must be logged in to post a comment.

Go to site