Getting a loan for a luxury car is very similar to getting a regular car loan — but the numbers are bigger. You might have trouble qualifying for a loan of this size unless you have great credit and can prove that you can afford the monthly repayments.
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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 something that suits your needs.
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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 5-6 years, but in Canada you may be able to get a 6-8-year loan to finance a more expensive ride. The interest rates can often fall between 3.99% and 6.99% for a 5-8-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.
Total Interest Paid on Loan
60 months (5 years)
72 months (6 years)
84 months (7 years)
96 months (8 years)
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 exotic car financing
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? Click here to read more about fixed-rate versus variable-rate loans.
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? Click here to read more about secured versus unsecured loans.
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.
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
Although all lenders are different, below is a list of some basic information you’ll likely need when applying for a loan.
Personal information, including your name, Social Security 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 (2018)
These luxury car brands are known for their speed, power and comfort. Starting at around $55,000, these are some of the vehicles that Canada’s well-to-do drivers love to take out on the road.
BMW X6 – Price: $71,900-$88,400 (the X6 M model starts at $114,700) One of the most well-known German car brands, BMW produces luxury cars around the world. Whether you want style, eco-friendly features or handmade design — remember, BMW owns Rolls-Royce — you can find it with BMW. Considered a “sports activity coupe,” the X6 is capable of going from 0-100km/h in 4.2 seconds. It’s also designed to reduce fuel consumption, which is great for city drivers.
Audi Q7 – Price: $61,900-$74,750 Another renowned German company — Audi is owned by Volkswagen and is among the top sellers of luxury cars around the world. The Q7 is a sporty midsize crossover SUV that comes as either a five – or seven-seater. It offers an array of comfortable features including an electronic assist system to monitor your distance from other cars, a coloured heads-up display and adaptive cruise control.
Lexus LC Series – Price: $102,100 (Hybrid: $118,600) Under the luxury division of Toyota, Lexus was once known for stuffy, conservative designs but has recently reemerged with a sleek, modern look designed to attract luxe car buyers. The LC Series comes with pre-collision technology to detect pedestrians and an infotainment media package. The upgraded version comes with sports seats, a retractable rear spoiler and 21-inch aluminum-alloy wheels.
Mercedes-Benz GLE-Class – Price: different models available for $70,000 – $115,000 The top-selling luxury car brand of 2016, Mercedes-Benz is known for beautiful design and great engineering, and the price you pay reflects it. Its GLE-Class of vehicles comes in 3 performance-oriented trims with twin-turbocharged 385-570 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.
Porsche Macan – Price: $54,100-$99,000 (Turbo package) Also owned by Volkswagen, Porsche is even more luxurious and glamorous than its Audi counterpart. Best known for its sport cars, it also offers trendy coupes and stylish SUVs. As of 2018, the Macan was one of the brand’s best-selling cars in Canada and comes in a widely varying price range. The upgraded Turbo package has a 440 horsepower engine and can go from 0-100 km/h in 4.4 seconds. Its top speed reaches 272 km/h.
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 2020 BMW 330I XDRIVE Sedan 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 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 license plates, a sticker and a vehicle permit.
Cost of new car
$45,050.00 ($53,000.00 less $7,950.00 down payment)
Auto loan (term loan)
Interest rate (APR)
3.00% origination fee ($1,558.20)
$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.
Unless you’re prepared to pay cash, finding good financing is an important step towards buying 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. Speak with a financial advisor and compare your car options carefully 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 score (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.
As of the original publication of this article (March 2019), no. While discussions about levying a tax on high-end vehicle purchases have taken place in provincial governments such as Ontario and British Columbia, there is no nation-wide tax as of yet. Your province’s current GST or HST rate represents the sales tax you will pay on any car purchase, luxury or otherwise.
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:
Cars used for business purposes
Imported cars (due to the cost and difficulty of getting replacement parts)
Sports cars and luxury vehicles
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.
Stacie Hurst is an associate editor at Finder. She earned a degree in psychology and writing but studied a number of other subjects in university including business and political science. Stacie loves giving people the tools they need to make knowledgeable and successful decisions. Her personal interests include writing, personal finance, web technology, photography and anything creative!
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