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How to finance a luxury car
Want to drive in style? Find out how to finance a luxury car in Canada.
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Luxury car financing in Canada is very similar to getting a regular car loan — but the numbers are bigger. To qualify for a loan of this size, you would need to prove that you can afford the monthly repayments. Banks, credit unions, alternative lenders and car dealerships offer loans to potential buyers, so keep reading to find out how to finance a luxury car.
How to finance a luxury car
A luxury car loan works the same as a regular car loan but you’ll be committing to a larger amount of money — most luxury cars start upwards of $40,000. A loan of this size is a serious undertaking, and you should make sure your budget can handle the monthly payments before you start browsing lenders.
Fortunately, there are plenty of loan options out there. Whether you’re seeking a secured or unsecured loan or a loan with a fixed or variable interest rate, you can find luxury car loans that suit your needs.
Where can I get luxury car financing?
Banks
Many of the big banks in Canada have loan options available for luxury purchases. Scotiabank car loans have loan amounts up to $200,000. Having a history with the bank and proof that you’re able to pay back the loan is integral to being approved though.
Banks typically charge around 5% interest rates for car loans.
Benefits of getting a loan from a bank
Competitive rates. Banks can offer some of the lowest rates available when applying for a loan.
Loan terms. Loan terms from banks can last 6 or 7 years.
Fixed or variable interest rate. You could get a choice of either a fixed or variable rate, which can influence your monthly payments. Fixed rates stay the same for the duration of the loan, while variable rates change over time.
What to watch for
Credit score. You’ll need to have a good to excellent credit score to be approved.
Credit unions
Credit unions offer car loans to customers in most of Canada. Coast Capital has no maximum loan amount, which helps when you’re looking for a larger amount for your new wheels.
Credit unions usually charge between 3% and 8% for interest rates.
Benefits of getting a loan from a credit union
Competitive rates. Similar to the banks, credit unions often have good rates when it comes to loans and luxury car financing.
Fixed or variable rates. Credit unions also often offer fixed or variable rates, depending on which lender you choose.
What to watch for
Credit score. Like the banks, credit unions may require you to have a good to excellent credit score to apply.
Dealers
Some dealers offer financing themselves, and oftentimes partner with other lenders such as major banks. RBC offers financing at more than 4,500 dealerships across Canada, with options for monthly, semi-monthly, bi-weekly or weekly payments and terms between 1 and 8 years.
Dealers usually charge between 2% and 10% interest, depending on the specifics of your loan. You can also get 0% car financing, but this offer has its share of drawbacks.
Benefits of getting a loan from a dealership
Convenient. Being able to get a loan from the same place that you pick up your new car makes the process easy and fast.
They’re often bank loans run through the dealership. Big banks have partnerships with dealerships all over the country to offer loans to customers. You’re really getting a bank loan through the dealership, so it can offer fixed or variable rates as well.
What to watch for
Sales pressure. Don’t be pressured into taking a luxury car loan from a dealer just because they’re selling you the car. There are other options available and taking your time to do the research can pay off.
Fees. There could be more fees associated with the loan since it’s coming through the dealership, which could act as a third party.
Alternative lenders
Alternative lenders, that is lenders that aren’t banks or dealerships, are also an option when looking for a luxury car loan. Companies such as Canada Drives help Canadians find the best car loan possible, even if they’ve already been rejected by the dealership or bank.
Interest rates can vary for alternative lenders, usually anywhere between 2% and 40%.
Benefits of getting a loan from an alternative lender
Tons of options. There are tons of options available for those who choose to use an alternative lender for their car loan.
More open to lending to people with bad credit. If your credit score isn’t great, there are still options available for you to get a loan through alternative lenders. Check out our rundown of bad credit car loans.
What to watch for
Interest rates. Alternative lenders tend to have higher interest rates than the other lenders mentioned above.
Representative example: Sergei buys a BMW
Sergei lives in Ontario and recently got a new job in another city, so he wants to buy a car that he can use for the daily commute. Sergei finds a luxury vehicle at a dealership for $53,000.00. After putting a 15% down payment of $7,950.00 on the car, he heads to his local bank where he applies for an auto loan to cover the remaining cost.
Because Sergei has a solid credit history, he is approved for a loan to cover the outstanding amount plus $5,856.50 HST on the purchase price. Along with the cost of his loan, Sergei also pays approximately $180.00 to register his vehicle with the province of Ontario — this includes the cost of licence plates, a sticker and a vehicle permit.
Cost of new car
$45,050.00 ($53,000.00 less $7,950.00 down payment)
Loan type
Auto loan (term loan)
Loan amount
$51,940.00
Interest rate (APR)
5.90%
Loan term
7 years
Additional fees
3.00% origination fee ($1,558.20)
Payment
$756.28 monthly or $348.68 biweekly
Total loan cost
$62,263.32 with monthly payments or $63,459.76 with biweekly payments
*The information in this example, including rates, fees and terms, is provided as a representative transaction. The actual cost of the product may vary depending on the retailer, the product specs and other factors.
What you need to know about long-term loans
When you’re looking into buying a luxury or exotic car, lengthier loan terms may start to pop up to make the purchase more affordable. The average term for a non-luxury car loan is about 5 to 6 years, but in Canada you may be able to get a 6-to-8-year loan to finance a more expensive ride. The interest rates can often fall between 3.99% and 6.99% for a 5-to-8-year loan, and it takes a knowledgeable buyer to get the most out of it.
The following shows the interest you might pay over various loan terms, assuming that your car costs $55,000, you’re making a $5,000 down payment, and your credit is good.
Note: these figures and interest rates are for example purposes only. Actual amounts vary based on your credit score, income, the age of your vehicle, dealer rebates, the trade-in value of your old car and other factors. Ask your lender what rates apply to you.
Loan Term
Interest Rate
Monthly Payment
Total Interest Paid on Loan
60 months (5 years)
4.99%
$943.33
$6,599.80
72 months (6 years)
4.79%
$800.39
$7,627.68
84 months (7 years)
4.49%
$694.78
$8,361.06
96 months (8 years)
3.99%
$609.23
$8,486.21
In this scenario, going for a 96 month (8 year) loan might get you a lower interest rate, but you’d also end up paying around $2,000 more in interest fees! If you know luxury, exotic and classic cars well and can realistically commit to making steady payments for a long time (and don’t mind paying more interest fees), then you may be able to handle a long-term loan.
Longer loan terms aren’t for everyone. If your financial circumstances change during the lengthy repayment period, you’ll be stuck with an expensive loan that you can’t afford. If you can afford to pay a higher monthly payment over a shorter time period, you should do it to save money in the long run.
How to compare luxury car loans
Beyond loan term, fees and repayment options, you’ll want to keep an eye out for loans that have these features:
Fixed or variable rate. Would you prefer a stable monthly payment, or are you willing to take a gamble on a fluctuating interest rate that could be lower down the road?
Secured or unsecured. Do you want to use your new luxury car as collateral to get a lower rate, as would be the case with a secured loan? Or are you okay with paying a little extra to avoid losing your exotic wheels, as would be the case with an unsecured loan?
Flexibility. Look for a lender that allows you to pay off your loan early without any penalties and that has a really good reputation for providing top-notch customer service.
Secured vs unsecured luxury car loans
The biggest difference between a secured loan and an unsecured loan is that a secured loan requires you to provide collateral to the lender. Secured loans for exotic car financing usually have better rates since lenders have something to recoup their losses on if you can’t pay them back.
Unsecured loans don’t require collateral but can come with higher interest rates and fees. The upside to that is you, as the borrower, don’t risk losing any collateral if you miss payments.
Most car loans in Canada are secured, but it is possible to find a lender willing to provide an unsecured car loan.
How much is a down payment on a luxury car?
A down payment on a standard car usually starts around 10% and goes up from there. If you plan on reselling the car in a few years, you should consider a higher down payment, say 20%, to get the vehicle paid off faster.
Luxury cars tend to depreciate faster than a “normal” car, so getting it paid off faster could benefit you in the long run.
4 mistakes to avoid
Small down payments. A hefty down payment helps reduce the cost of the loan and lower your monthly payments. Paying more upfront will save you a lot of interest fees down the road.
Adding one-time costs into the loan. Some lenders might let you include the taxes and cost of vehicle registration in your loan, but remember — anything added to your loan balance will increase the interest you have to pay.
Not comparing your options. A luxury car should not be a spur-of-the-moment purchase. Take your time to review your loan options and your financial situation to be sure you can handle the payment schedule.
Long terms. Unless you’re buying your car as an investment, going for an extra-long term means you’ll pay a lot more in interest.
How to apply for luxury car financing in Canada
All lenders will require different information when you apply for a loan, but here is some of the information you’ll most likely need to provide.
Personal information, including your name, Social Insurance Number and proof of identity
Employment information, including your income, your employer, the length of your employment and Notices of Assessment from the current and previous tax years
Financial information, including your assets, credits, and debts and liabilities
Vehicle information, including make, model, condition and price (this can be obtained from your dealership)
Business information if the car is being purchased by a business
Since you’re borrowing a large amount, your credit score needs to be high with a near-perfect payment history. Lenders are unlikely to extend a loan to someone whose score and history don’t reflect upstanding financial decisions.
Can I qualify?
It depends on your lender but generally you must:
Have good or excellent credit. If you want an unsecured loan, you’ll likely need to have near-perfect credit to be eligible for a large enough loan to buy a luxury vehicle.
Have a low debt-to-income ratio (DTI). You generally can’t qualify for a loan with a DTI over 43%, though it’ll likely need to be much lower for a luxury car loan.
Make enough to afford repayments. Lenders for loans of this size often require you to have an income near, or exceeding, six figures.
Popular luxury cars in Canada (2023)
These luxury car brands are known for their speed, power and comfort. Starting at around $50,000, these are some of the vehicles that Canada’s well-to-do drivers love to take out on the road.
Mercedes Benz GLE Class — Starting at $75,800. Regularly featuring among the top-selling luxury car brands, Mercedes-Benz is known for its beautiful design and great engineering, and the price you pay reflects it. Its GLE-Class of vehicles comes in four performance-oriented trims with twin-turbocharged 255-603 horsepower engines (depending on the model). Best suited for city driving, these vehicles have been in high demand among Canadian drivers for a number of years.
Mercedes Benz GLC Class — Starting at $51,600. The GLC class, the little sibling of the GLE class, comes with a substantially smaller price tag to match but doesn’t compromise on features. The 255 horsepower engine can boost you up to 100km/h in just 6.2 seconds for those looking for a speed thrill. The mid-size SUV is great for the city but can hold its own on dirt roads as well.
BMW 3 Series — Starting at $55,000. The BMW 3 Series Sedan has been a strong seller in Canada in recent years. Combining refined handling with impressive performance, it offers an engaging drive in the city and on winding country roads. It’s loaded with tech features too, including BMW’s Reversing Assistant and other intelligent driver assistance systems.
Audi Q5 — Starting at $51,850. This best-selling luxury SUV is small enough to take through any downtown area but big enough to pack full of the essentials for a weekend getaway. The engine produces 261 horsepower, more than enough to get up steep inclines with a full trunk, while the Bang & Olufsen sound system means you can enjoy all your road trip tunes with 3D sound.
Bottom line
Unless you’re prepared to pay cash, it’s important to know how to finance a luxury car. Most cars are bound to depreciate, so understand how much you’re paying, how much debt you’re taking on, and the financial position you’ll be in by the end of your loan term. Compare your options for luxury car financing in Canada until you’re sure you’ve found the best deal available.
Frequently asked questions
Not necessarily, but lenders will want to see that you pay your debts and are able to handle your monthly payments. The best rates are typically given to people with excellent scores (780+), but good scores at, or above, 660 will yield decent rates as well. The lower your credit score, the less chance you have of getting approved for a car loan, especially if you fall below 600. And even if you are approved, your interest rate will be higher to make up for the (perceived) increased risk that you will default on your loan.
You’ll find car loans with terms as short as 24 months and some as long as 96 months. However, the average new luxury car is financed for around 60 to 72 months. Shorter terms are usually preferable to save money, but longer terms will lower your payments. Consult your financial advisor to determine which loan term is appropriate for you.
Yes. The Government of Canada introduced a luxury tax on the sale or importation of luxury vehicles in September 2022. Find out how this tax works by checking out this overview from the Canada Revenue Agency.
Yes, having a luxury car usually means paying higher insurance rates. Ontario usually has the most expensive auto insurance due to the high volume of accidents that regularly occur there. In Ontario a 36-40 year-old male could pay $2,000-$4,000 per year for high-end car insurance – a female would likely pay less. However, in B.C. he might pay $1,300-$2,000 per year, while in Nova Scotia he might pay $900-$1,300 a year. A woman would likely be charged more in both provinces.* Rates for drivers under 25-years-old are always higher – in Nova Scotia, a male under 25 could end up paying 3 times what a 36-40 year-old man might be charged!*
Luxury cars are worth more, which means they cost more to insure in the event that they are damaged or stolen. Insurance companies will also determine your rate based on the number of accidents or thefts on record for all drivers who have owned your type of car.
Cars with the following characteristics are known to cause a jump in premiums:
2-door models
Newer vehicles
Cars used for business purposes
Imported cars (due to the cost and difficulty of getting replacement parts)
Sports cars and luxury vehicles
Convertibles
However, as with all insurance, your driving record and where you live impacts your annual premium, as does your credit score. Once all of these factors are taken into account, you may see your premium bump up. Try to take into account the list of “red flag” characteristics above when you purchase a car in order to keep your insurance rates from skyrocketing.
*Data and rates are purely hypothetical and are based on information obtained from www.insureye.com/rates. Other factors not discussed here could impact the actual amount you end up paying. Check with your auto insurance provider to find out what rates you qualify for.
Chris Arnold was a writer for Finder. Chris is experienced in both print newspaper and digital publications. He has written for papers from Montreal to Vancouver under the Postmedia chain and tackled Toronto’s luxury real-estate market for the Globe Content Studio. Chris has a bachelor’s degree in media studies with a specialization in journalism from the University of Guelph and a diploma in media communications from Humber College. When not writing, he spends his time playing guitar. See full bio
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