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Car loans for first-time buyers

How to get affordable financing for your first set of wheels.

You’re buying your first car, and you’ve got a lot of things on your mind — but you may not have figured out how you’ll pay for your first set of wheels. Finding a car loan can be tough if it’s your first time but options like bringing on a cosigner can help you qualify. Keep reading to find out what you need to know about car loans for first-time buyers including financing options and common pitfalls to avoid.

CarsFast Car Loans

CarsFast Car Loans

From

4.9 % APR

rate

  • New and used vehicles
  • Multiple financing options
  • Pre-approval in 60 seconds

CarsFast Car Loans

Apply online in just 2 minutes and browse thousands of vehicles from dealers across Canada. Get the vehicle delivered right to your door.

  • Interest Rate: 4.90% to 29.90%
  • Loan Amount: $500 - $75,000
  • Loan Term: 12-96 months
  • Eligibility: Min. income of $1,800 /month, 3+ months employed
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3 common loans for first-time car buyers

Depending on what kind of car you’re buying and your own personal financial situation, you may want to consider one of the following loans:

  • A car loan. Car loans are offered by dealerships, banks and other lenders. Rates are competitive because your car is used as security for the loan. You can use these loans for both new and used vehicles.
  • A secured personal loan. With a secured personal loan, you can use other assets besides a car as collateral and borrow more but still get the same competitive rates.
  • Unsecured personal loan. Don’t want to risk losing your car? Consider an unsecured personal loan. Keep in mind that you’ll typically need good credit and might need to bring on a cosigner to qualify.

Compare these providers for a first car loan

Name Product Min. Loan Amount Interest Rate Loan Term Min. Credit Score Requirements
CarsFast Car Loans
$500
4.90% to 29.90%
12-96 months
300
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.
Loans Canada Car Loans
$500
0% to 29.99%
3-96 months
300
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.
Car Loans Canada
$7,500
3.99% to 29.95%
12-84 months
300
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.
Coast Capital Car Loan
$10,000
Varies
18-84 months
650
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
$7,500
3.99% to 29.95%
12-84 months
300
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.
LoanConnect Car Loans
$500
9.90% to 46.96%
3-120 months
550
No min. income requirement
Get access to 25+ lenders through LoanConnect's brokerage. Receive pre-approval in as fast as 60 seconds and get your funds in as little as 24 hours.
Canada Auto Finance
$500
4.90%-29.95%
3-96 months
300
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
$500
1.90% to 19.99%
Up to 72 months
300
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.
Fairstone Secured Personal Loan
$5,000
19.99% to 23.99%
36-120 months
560
Established credit history and own your home
Fairstone offers secured personal loans up to $50,000.
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What to do before applying

  • Know your credit score range. Your lender might ask about your credit score when you apply for a loan. You can get an estimate based on a soft credit pull that won’t go on your credit report.
  • Get your debt-to-income ratio (DTI). Lenders often look at your DTI to make sure you can afford to take on more debt. You can use our calculator to find out what your DTI is.
  • Your monthly income. Your DTI doesn’t consider everything. To make sure you can budget new debt, know how much you typically bring in each month before you apply.
  • Your monthly expenses. Go through your bank and credit card statements to find out how much you spend each month. Subtract this from your monthly income to get an idea of how much debt you can afford to take on.

Loans aren't necessarily one-size-fits-all

You may need to apply to multiple lenders and could face rejection if you have a limited credit history. When you’re ready to apply for a loan, consider requesting quotes from multiple lenders using a broker. Many auto lenders can offer you pre-approval that won’t count as an inquiry on your credit.

5 tips for first-time car buyers

  1. Check your credit report. You have free access to your credit report once a year. Read over it and make sure nothing has been misreported. If it has, it may be negatively affecting your credit. Correct any mistakes before you apply for a loan.
  2. Apply for pre-approval. Your credit won’t be impacted if you apply for car loan pre-approval. This can determine how much you can afford before you start searching for your first car.
  3. Have a large down payment. By having cash or a car to trade in, you reduce the amount you need to borrow. This makes you less of a risk to lenders and shows you’re able to build up your finances responsibly.
  4. Add a cosigner. A parent or a more established adult may be willing to be a cosigner to your loan. If you prove to be trustworthy and able to meet your debt obligations, having a cosigner can significantly improve your chances of approval.
  5. Build your credit score. This option takes the longest, but can have an impact on your interest rate. Consider a store card or credit card to start building your score to prove to lenders that you have what it takes to pay off a loan.

Compare car loans now

What do I need to apply?

Once you’ve found a lender and loan product you’re happy with, click the Go to site button on the table above. Most lenders require that you be at least 18 years old and either a citizen or a permanent resident of Canada.

Information that is generally requested by lenders are:

  • Personal details, including your name and address; usually government-issued photo ID must be presented
  • Financial details, including your income, employment and outstanding debt
  • Vehicle details, including make and model

Pitfalls to avoid when getting your first car loan

  • Comparing interest instead of APR. Your loan’s APR (Annual Percentage Rate) is a better representation of its total cost, since it includes rates, fees and costs associated wit getting the loan. A no-interest loan with high fees might come with an APR much higher than a high-interest loan with no fees. By looking at the APR, you’ll have a much clearer picture of how much a loan will actually cost you on a yearly basis.
  • Applying solo with limited credit. If you don’t have a thick credit file, you probably won’t get good deals on your first car loan unless you bring on a cosigner.
  • Going for a 72-month term. Long terms might lower your monthly costs but you’ll pay more in interest and risk having a loan that’s worth more than the value of your car.
  • Not making a down payment. A 20% down payment on your car can save you a lot in interest and fees.

Find my first car loan

Bottom line

Your first car loan may not be the cheapest financial move, but it’s one that can make a difference in your life for years to come. The good news is this loan will build your credit, making future loans that easier to qualify for.

Frequently asked questions

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