Learn about 6 car loan scams and compare legit lenders

Canadians lost $275 million to fraud in 2021, according to the Canadian Anti-Fraud Centre. With so many car loan options on the market, how can you tell if a provider is legitimate?

As a starting point, you can check out the list of providers below with our reasons for why they’re legitimate. Plus, learn about common car loan schemes and how to avoid them.

Which car loan providers are legit?

Car loan provider	Key features	How they are legit
	CarsFast allows you to pre-qualify for loans from multiple lenders and compare your rates. You can apply with bad credit. Interest rates: 4.90% - 29.90%	It has helped 350,000+ customers. It has been featured in The Globe and Mail. It’s partnered with the Big Six banks.	Go to site
	Loans Canada is a broker with the largest lender network in Canada. Get matched with lenders that want to finance your car loan. Interest rates: 0% - 31.99%	It’s a member of the Canadian Lenders Association. It’s BBB-accredited with an A+ rating. It’s been mentioned in the media, such as Toronto Star and CBC.	Go to site
	Coast Capital is a credit union that offers car loans across Canada, except Quebec and Saskatchewan. A membership is not required. Interest rates: Varies	It is one of the largest credit unions in Canada with an 80-year legacy. Its head office is in Surrey, BC. It’s a platinum member of Canada’s Best Managed Companies.	Go to site
	Canada Auto Finance is a free car loan matching service, connecting auto loan applicants with local dealers. Interest rates: 4.90% - 29.95%	It is partnered with local dealers across Canada. It doesn’t issue any loans. Instead, it connects you with dealers and lenders who can help you with your car purchase.	Go to site
	Clutch is an online dealer. Browse 2,000+ cars and have your car delivered to your door. “Test Own” for 10 days/750 km. Interest rates: From 3.90%	It is BBB-accredited with an A+ rating. It has been featured in The Globe and Mail, Global News and TechCrunch. It’s partnered with the big banks.	Go to site
	CarDoor is an online car dealer that serves the Greater Toronto Area. CarDoor has a 14-day money back guarantee and a generous 60-day exchange program.	It is a registered corporation and can be found in the Ontario business registry. It’s partnered with the big banks to provide financing.	Read review
	Splash offers car financing to borrowers with poor credit, no credit and those going through bankruptcy. Interest rates: 9.90% - 29.90%	It is a division of Rifco, one of Canada’s largest non-chartered banks for non-prime auto financing.	Go to site
	Carloans411 is an easy-to-use online platform that lets you get financing from a dealership near you. Get matched with a loan provider. Interest rates: 1.90% - 19.99%	It has been in business since 2008, with offices in Toronto and Vancouver. It is active on all social media platforms, including Facebook, Twitter and Instagram.	Go to site
	LoanConnect's search engine shows lenders with highest likeliness of positive results. Interest rates: 9.90% - 46.96%	It’s accredited by the Better Business Bureau and approved by the Canadian Lenders Association. It has a head office in Toronto.	Go to site
	Canada Drives has a large inventory of vehicles so your car shopping experience can be done completely online. It also offers car financing. Interest rates: 4.75% - 29.99%	It has received more than 1 million applications since 2010. It placed 186th on The Globe and Mail’s 2020 Report on Business ranking of Canada’s Top Growing Companies.	Go to site
	Auto Loan Providers is an Ontario-only lender lets you choose a vehicle type first, then helps you determine how much loan you can afford before car shopping. Interest rates: 3.99% - 29.99%	It is an offshoot of Automobile Finance Centre, which has been in business in the last 20+ years. It offers a 30-day car exchange program. It has a head office in Aurora and a call centre.	Read review
	With Auto Credit Deals, apply in 3 minutes and find out how much you qualify for. Browse vehicles within your budget. Interest rates: Not specified	It is a legally registered business in BC and can be found in the OrgBook BC database. It is owned by Canada Drives Ltd.	Read review
	Driving with Steve is partnered with certified dealers across Canada. Find out first how much you can borrow, then browse cars within that range. Interest rates: 0% to 29.99%	It is a legally registered business in BC and can be found in the OrgBook BC database. It is owned by Dealer Media Inc.	Read review
	401 Auto Financing considers applicants who are on ODSP, in a consumer proposal or have bad credit. Interest rates: From 0%	It is legally registered in the Ontario Business Registry. It has multiple locations with a corporate office in Cambridge. It is owned by 401 Auto RV Canada Inc.	Read review

See our A-to-Z list of car loan provider reviews

6 common car loan scams

Some dealerships or sketchy car loan providers are just interested making money, even if it’s at your expense. If you’re not working with one of our trusted providers listed in the table above, keep an eye out for these car loan scams.

1. Yo-yo financing and spot delivery scams

Yo-yo financing (or spot delivery scam) is a tactic used by many dealers to get you into a new car and off the lot the same day you walk in — whether your loan is approved or not. If the dealer can’t sell your loan off for a profit, you’ll be informed that the financing has fallen through. You’ll either need to renegotiate your terms or return the car.

If you’ve settled on a monthly payment plan of $250, the dealer may call you up after a week and tell you that you’ll need to pay $350 in order to get financed, otherwise your new car will be repossessed. The dealer might claim that it’s already sold your trade in or it will call the police if the car isn’t returned immediately.

2. Guaranteed approval

As with other types of loans, there’s no such thing as guaranteed approval, but many dealers will use this to get buyers on the lot. They’ll run your credit, and chances are you’ll be approved — for outrageous terms.

Why do dealers run these car loan scams? There’s a chance that a buyer has decent credit for a loan at a moderate, yet affordable rate. And some borrowers may need a car regardless of the terms they’re offered.

3. Upfront fees

No matter if you get your financing through a dealer or an independent lender, upfront fees are a bad sign. Lenders may encourage or coerce borrowers to pay a fee before the application is processed or before the funds are distributed. Don’t be fooled — these car loan scams are an attempt to get you to pay, regardless if you get the loan or not.

Upfront fee scams typically happen online where you can get lured into paying the fee and then never hear from the lender again.

4. Packing payments

Some call it a scam, some may just see it as a dealer trying to rip you off, but either way, packing payments change the price you pay for your loan.

A dealer encourages a buyer to focus on the monthly payment, not the total cost of the vehicle, and then packs on unnecessary extras that only change the monthly payment by $10 or $20. Over the life of a multi-year loan, however, that $10 or $20 becomes thousands of dollars.

5. Loan modification scams

A loan modification scam happens after a buyer takes out a loan and struggles to make payments. Seeking relief, you may turn to businesses that claim to negotiate with the lender for a small upfront fee, usually a few hundred dollars.

As with most things, if it sounds too good to be true, it likely is. Victims of loan modification car loan scams are often told to stop making payments to their lender because the loan modification company is going to take care of negotiations. This never happens, and the victim can’t get in contact with the company after paying for the service.

6. Cosigner scam

If a borrower doesn’t qualify for financing on their own, a dealership may suggest they get a friend or family member to cosign the loan agreement. Getting a cosigner for a loan is a legitimate practice, but the scam happens when the dealership removes the original buyer from the contract, and the cosigner is on the hook to make all the payments as the primary borrower. They do this by making the original buyer and the cosigner sign multiple sets of paperwork.

More common dealership car-buying scams

Although not technically considered car loan scams, some tactics dealers use can cheat you out of your money.

• Low-balling the value of your trade-in. Dealers are trying to make a profit, but that doesn’t mean you should settle for a bad offer. You can visit multiple dealers to see what they’ll pay for your old car so you can be sure the dealer you choose is giving you a good price. You can also use multiple offers to negotiate better deals among competing dealers.
• Hiding problems that could cost you down the road. Some disreputable dealers will attempt to hide problems to sell you the car at a higher price. Have your purchase dependent on an inspection by a mechanic to avoid being fooled by a good paint job. Also, make sure you get a vehicle history report from a reputable company like CARFAX or AutoCheck.com to study your vehicle’s maintenance history, accident records and ownership status.
• Title washing. Some dealers transport salvaged vehicles to a different province that doesn’t recognize that brand. You can make sure that your used car isn’t worthless by looking at its record online. Viewing a vehicle’s history can save you lots of money down the road and help you avoid buying a lemon.
• Implying your credit score is low. A dealer may try to tell you your credit score is lower than it actually is in an attempt to offer you a high interest rate. Check your credit with companies like Experian, Equifax or TransUnion before you visit a dealership so you know where you stand financially.

What’s my credit score?

How can I avoid a car buying scam?

A reliable way to avoid being scammed or ripped off by a dealer is to arrange your own financing and to know your credit score.

• Arrange your financing. Browse our guide on car loans before visiting a dealership to get your financing in order — it gives you more negotiating power and could help you lower the cost of your purchase.
• Know your credit score. Your credit score will influence how much a lender will let you borrow and the interest rate you can get. Checking your credit score before buying a car will help you avoid dealers trying to offer you a bad loan.

How do I know if I’m the victim of a scam?

You might be a victim of car loan scams in one of the following situations:

• You’re paying more than you were told. If your original loan documents don’t match up with what you’re being charged, you could be a victim of a scam.
• You paid for something you didn’t receive. Another common sign you’re being scammed is if you paid for a service or product upfront before the lender all but vanished.
• You’re being threatened. Lenders that threaten you with a lawsuit or even jail time might be covering up a scam. If you’re afraid of what your lender might do, do some investigating — it might be illegal.
• You can’t get in touch. Scammers often provide fake contact information so you can’t reach out.
• There were blank spaces on your contract. Sometimes scammers offer contracts with wide blank spaces that they can fill it in with terms and conditions you would never agree to.

What to do if you’ve been scammed

It’s always best to educate yourself and avoid a scam altogether. However, if you think you’ve been the victim of a scam, you have a few options:

• Report it to the Canadian Anti-Fraud Centre. The centre is run by the Ontario Provincial Police, the RCMP and the Competition Bureau. File a report easily online or by phone.
• Contact your bank or credit union. This may be a necessary step, especially if you’ve fallen for a loan modification scam. Make sure your bank or credit union locks your account to prevent withdrawals.
• Contact the major credit bureaus. Have TransUnion and Equifax issue a fraud alert for your credit reports. This helps prevent any new credit accounts being opened in your name.
• Change your passwords. If you applied for a car loan online and later found it was a scam, change your passwords for all your important financial accounts.
• File a report with the police. A local dealership running scams needs to be reported to the police so that they can be held accountable for their harmful practices.
• Contact politicians. Enough complaints from consumers can also lead to an overhaul of local and even federal regulations.

Compare features of legit car loans

Check out details from our trusted car loan providers in the table below, like loan terms, rates and credit score requirements. You can compare two or more providers side-by-side by checking the compare box beneath each provider you’re interested in.

Sort by:

Name	Product	Loan Amount	Interest Rate	Loan Term	Min. Credit Score	Requirements
CarsFast Car Loans		$500 - $75,000	4.90% - 29.90%	12 - 96 months	300	Min. income of $2,000 /month, 3+ months employed	Get a new or used vehicle delivered to your door. Browse thousands of vehicles from dealers across Canada and get matched with financing that meets your needs.	Go to site More Info	Compare	loading Fetching your data...
Loans Canada Car Loans		$500 - $35,000	0% - 31.99%	24 - 120 months	300	Min. income of $1,800 /month, 3+ months employed	Compare rates from 60+ lenders. Complete a single application to get quotes from different lenders. Bad credit, CERB and EI borrowers considered. 0% APR for new cars only, used car rates start at 7.99%.	Go to site More Info	Compare	loading Fetching your data...
Coast Capital Car Loan		$10,000 - No Max.	Varies	18 - 84 months	650	Able to service debt payment of $300/month	Competitive rates and flexible terms. Finance new and used vehicles from one of Canada's largest credit unions. No credit union membership required. Available across Canada except SK, QC, NT, NU, YT.	Go to site More Info	Compare	loading Fetching your data...
Clutch Car Loans		$7,500 - No Max.	From 3.90%	12-96 months	580	3+ months employed, Max.1 bankruptcy	Pre-qualify for a loan in under 2 minutes with no impact to your credit score. Get approved for financing in under 24 hours for the used car you want. No hidden fees. Get the vehicle delivered to your door.	Go to site More Info	Compare	loading Fetching your data...
Canada Drives Car Loans		$7,500 - $99,999	4.75% - 29.99%	12-84 months	400	Min. income of $1,800 /month	Buy a used car online and get it delivered to your door in under 24 hours. Get pre-approved for financing in 3 minutes with no impact to your credit score. No fees or penalties for early loan repayment.	Go to site More Info	Compare	loading Fetching your data...
Carloans411 Car Loans		$500 - $50,000	1.90% - 19.99%	Up to 72 months	300	Min. income of $1,600 /month, 3+ months employed	High application approval rate. Get connected with suitable lenders to finance your next car, van or truck. Check eligibility for this loan through LoanConnect.	Go to site More Info	Compare	loading Fetching your data...
Canada Auto Finance		$500 - $45,000	4.90% - 29.95%	3 - 96 months	300	Min. income of $1,500 /month, 3+ months employed	Get financing from partnered local lenders. Financing for a new or used car is available for borrowers with bad credit, no credit, CERB, EI or bankruptcy.	Go to site More Info	Compare	loading Fetching your data...
Splash Auto Finance		$10,000 - $50,000	9.90% - 29.90%	24 - 84 months	300	Min. income of $2,200 /month, 3+ months employed	Apply with any credit score. Get financing for a new or used car. Auto loans for borrowers with fair credit, bad credit, no credit or bankruptcy.	Go to site More Info	Compare	loading Fetching your data...

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Bottom line

Your best defence against scams is knowing what to look for before visiting a dealership. Many common dealer scams target buyers with poor or bad credit scores, but that doesn’t mean you have to settle. Our comparison of the best car loans in Canada can help you sift through your options and find the best deal for you.

Frequently asked questions about car loan scams

• Is Canada Car Program legitimate?

  We’re not signing off on its legitimacy. We like that it has a privacy policy and terms and conditions; however, this provider does not have an office address or phone number on its website, and the website itself is underdeveloped. We also don’t like that it says you’ll get approved regardless of your credit. Finally, we did not find it in the Ontario business registry. Compare legitimate alternatives.

  Information above is as of July 5, 2022.

• Is Autofix Credit legitimate?

  We’re not signing off on its legitimacy. We like that it provides a phone number, email address and privacy policy; however, it does not provide its office address or terms and conditions, and the website is underdeveloped. We also did not find it in the Ontario business registry. Compare legitimate alternatives.

  Information above is as of July 5, 2022.

• Is Car Loans Canada legit?

  Yes. Car Loans Canada works with a large network of lenders that includes financial institutions like Bank of Montreal, Royal Bank, Scotia Bank, TD, CIBC, National Bank, Desjardins and more. Car Loans Canada has over 200 employees and has been in business since 2002.

• How do dealerships make money off financing?

  Dealerships make money by selling your loan to a bank or financing company and splitting the profit made off of interest. This is why dealership financing might come with higher interests rate outside lenders – after giving the bank its share, dealerships will markup the interest rate slightly to make a profit.

  You can sometimes get better deals with dealership financing, but these rates might only be offered to customers with excellent credit or might only be available when bundled with other, less advantageous terms (like having to make extended interest payments over a longer repayment period). Be aware of great promotional interest rates that revert to higher rates after a specific time.

• Is it legal for a dealer to take back my car?

  Provided the dealer has put wording similar to “conditional” or “subject to loan approval” in your contract, then yes, it is legal for a dealer to take back your car and cancel the contract within a certain period after buying.

• Can a lawyer look over a car loan contract?

  Absolutely. In fact, having a lawyer look over your car loan is one thing you can do to protect yourself against a scam. Some dealers may try to pressure you to sign right away, but this is just another tactic to get you to buy quickly. Taking out a loan to buy a car is an important decision – take as much time as you need to think it over, and don’t let a dealer rush you.

• I got stuck with a bad car loan. What can I do?

  There are several ways to get out of a bad car loan, from refinancing with a new lender to moving your debt to a balance transfer credit card. You can learn more about your options with our guide to getting out of a bad car loan.

• I saw a car ad for a really good deal. Is it legit?

  It might be, though many car ads feature deceptively low prices that are difficult to qualify for just to get you in the door. The easiest way to know if the price you see in an ad is real is to contact the dealership or manufacturer directly.