If your car is in need of repair and you don’t have an emergency fund at the moment, car repair loans are a viable solution. This guide covers the five types of financing you can get for urgent car repairs, how they work and where you can apply.
1. Unsecured personal loans for car repair financing
Banks, credit unions and online lenders offer unsecured personal loans to finance car repairs. If you have good to excellent credit, you can get approval from many places and score low rates. If you have bad credit, you can apply to online lenders, but watch out for high rates.
Auto title loans are loans secured to the title of your vehicle. You can still drive your car while you’re repaying the loan, but your car is used as collateral. If you don’t make regular payments on your auto title loan, your vehicle can be repossessed and sold.
Apply for a vehicle title loan to finance car repairs
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Pros
Apply and get your funds within 24 to 48 hours
Available to borrowers with bad credit
Loan amounts typically up to 25% – 50% of the value of the car
Flexible loan repayment terms of 3 - 60 months
What to watch out for
High rates for bad credit
Possibility of losing your car if you default
Potential to work with disreputable lenders
3. Credit cards for auto repair financing
You can always rely on your current credit card to finance an auto repair. Depending on how long it takes you to pay off your credit card, this could potentially be one of the most expensive options. You can also look into applying for a new low interest credit card or a card with a 0% interest promotional period.
Compare low interest credit cards to finance car repairs
With no cash back or rewards points, the Scotiabank Value Visa Card doesn't come with a lot of extra perks – but it can be a great tool for saving money on car repairs. Get a 0% introductory interest rate on balance transfers for the first 6 months. Plus, pay no annual fee in the first year. Apply by October 31, 2024.
Low interest rate. Low purchase and cash advance interest rates of 12.99%.
Balance transfer option.
Low ongoing interest rate. Once the promotional balance transfer period ends, any unpaid balance will incur the low rate of 12.99%.
Annual fee. This card has an annual fee of $29.
Limited benefits. No cash back or rewards.
Foreign transaction fee. This card has a foreign transaction fee of 2.5%.
Annual fee
$0 intro annual fee for the first year ($29 thereafter)
Purchase APR
12.99%
Balance transfer APR
0% intro for the first 6 months (then 12.99% )
Balance transfer fee
$3.50
Rewards
Get an on-going low interest rate of 12.99% on eligible purchases.
The BMO Preferred Rate Mastercard is a simple, no-frills credit card with a low interest rate of 13.99% for purchases and 15.99% for cash advances. You won't earn any rewards points or cash back, but this card's low rate can help you save on car repairs. Get a rate of 0.99% on balance transfers for 9 months with a 2% transfer fee. Plus, get the $29 annual fee waived in the first year.
Low interest rate. Low APR of 13.99% for purchases and 15.99% for cash advances.
Intro offer. Get a rate of 0.99% on balance transfers for 9 months with a 2% transfer fee. Plus, get the $29 annual fee waived in the first year.
Coverage. Get Purchase Protection, Extended Warranty coverage and Zero Liability protection.
Annual fee. This card has an annual fee of $29.
Limited benefits. No cash back or rewards and no extra perks like complimentary travel insurance or car rental benefits.
Balance transfer fee. This card comes with a balance transfer fee of 2%.
Foreign transaction fee. This card has a foreign transaction fee of 2.5%.
Annual fee
$0 intro annual fee for the first year ($29 thereafter)
Purchase APR
13.99%
Balance transfer APR
0.99% intro for the first 9 months (then 15.99% )
Balance transfer fee
2%
Rewards
N/A
Pros
Funds are readily available to pay for repairs
Low interest credit cards come with more competitive interest rates
Access to the total credit card balance
Great way to collect rewards points or cashback
Open-ended repayment plan as long as you make the minimum monthly payment
What to watch out for
Most credit cards come with a high interest rate of 19.99%
Make sure the repairs do not exceed your credit limit
Potential for extra charges for missed, late or NSF payments
4. Car repair loans through the auto repair shop
It’s also worth asking the auto repair shop if they offer in-house car repair loans or work with a partnered lending company to provide financing to customers. With in-house car repair loans, you may come across low- or no-interest introductory rates on offer to entice customers to make their repairs and financing a one-stop shop.
While it may be convenient, do your research before committing to auto shop financing. You may find in the fine print that interest rates spike after the introductory period is over, or you’ll incur extra fees for refinancing your loan.
Pros
Convenience, with repairs and financing in one place
Potential for in-house financing perks and promotions
Potential to receive funding quickly to cover your bill
What to watch out for
Potential for steep interest rates
Potential for putting your vehicle up as collateral
Potential for extra charges
May require a down payment
May require a lengthy list of eligibility requirements to meet
5. Emergency car repair financing via payday loans
Payday loans are some of the most expensive types of financing you’ll come across. You can borrow up to $1,500, but in Ontario for example, you’ll pay $15 for every $100 borrowed.
On the upside, you can get payday loans in as little as one hour, and they have mnimial eligibility requirements.
⚠️ Warning: Be cautious with payday loans
High-cost payday loans are unsustainable for borrowing over a continued period of time and are expensive as a means of longer-term borrowing. View payday costs and regulations by province here. If you're experiencing financial hardship call Credit Counselling Canada for free financial counselling (Monday-Friday 8:00am-5:00pm at +1 866-398-5999). You may also want to consider payday loan alternatives.
Compare payday loans to finance car repairs
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Maximum borrowing costs of payday loans per province
Always refer to your contract for exact repayment amounts and costs.
Province
Max. cost of borrowing a $100 payday loan
Cooling off period to cancel loan
Max. penalty for returned cheque or pre-authorized debit
Alberta
$15
2 business days
$25
British Columbia
$15
2 business days
$20
Manitoba
$17
48 hours excluding Sundays and holidays
$20
New Brunswick
$15
48 hours excluding Sundays and holidays
$20
Newfoundland and Labrador
$14
2 business days
$20
Nova Scotia
$15
Next business day (2 days for online loans)
$40 (default penalty)
Ontario
$15
2 business days
$25
Prince Edward Island
$15
2 business days
N/A
Quebec
Limit of 35% AIR
N/A
N/A
Saskatchewan
$17
Next business day
$25
Pros
Easy application with a quick turnaround for funding
Basic eligibility requirements
Bad credit doesn’t matter
No collateral required
What to watch out for
APRs can be reach 390% or more
You’ll typically have to repay with your next paycheque
Loan amounts cap out at $1,500
Am I eligible for car repair loans?
While eligibility criteria differ from lender to lender, you’ll need to meet these basic requirements to qualify for a car repair loan:
Be the age of majority in your province or territory with a valid driver’s licence
Be a Canadian resident with a valid Canadian address and active bank account
Have a steady form of income – in some cases, you may need to be employed for at least three months
What do I need to apply for car repair loans?
During the application process, you may be asked for the following:
Valid piece of ID
Proof of residence via utility bills or other mail with your name and address included
Proof of income via recent pay stubs, bank account statements or other relevant financial documents
An active bank account to transfer funds and set up automatic repayment withdrawals
Can I get car repair financing with no credit check?
Some lenders do offer car repair financing with no credit check. But be careful, because scammers and disreputable lenders use “no credit check” to attract borrowers. With scammers, you’ll be putting your personal and financial information at risk, and with disreputable lenders, you could be signing up for an expensive, unaffordable car repair loan. And if you put up your car as collateral, which is a requirement with some lenders, you could lose it.
In terms of speed, payday loans are one of the fastest emergency car repair loans you can get. Payday lenders can give instant decisions and e-transfer payday loans 24/7. Installment loans are slower to get, but you can typically get one within 24 to 48 hours. They are also cheaper than payday loans.
According to a recent J.D. Power 2023 Canada Customer Service Index—Long-Term (CSI-LT) Study, the average repair cost in Canada per visit for vehicles between 4 and 12 years old is $432 at a dealership and $262 at an independent repair shop. However, depending on the type of car repair, you could end up spending significantly more than that.
ConsumerAffairs reports (according to RepairPal) that the most expensive car repairs people encountered on average were hybrid high-voltage battery replacement, transmission replacement, cylinder head replacement and supercharger assembly replacement. The most expensive car brands to repair are Porsche, Land Rover, Jaguar, Audi and BMW.
Here’s a breakdown of the average costs for the 10 most expensive automotive repairs. Although all amounts in the table below are listed in USD, it can still help give you an idea of the possible relative repair cost in Canada.
Repair
Average cost (USD)
1. Hybrid high-voltage battery replacement (2022 Audi A4 with 15,000 miles)
$6,645-$6,719
2. Transmission replacement
$5,266-$5,469
3. Cylinder head replacement
$3,575-$3,928
4. Supercharger assembly replacement
$3,276-$3,472
5. Transfer case replacement
$2,911-$3,035
6. Catalytic converter replacement
$2,224-$2,309
7. Dashboard replacement
$2,146-$2,298
8. Turbocharger assembly replacement
$2,028-$2,429
9. Head gasket replacement
$1,915-$2,220
10. Rack and pinion replacement
$1,757-$2,089
It’s very important to obtain multiple quotes and compare estimates from different mechanics before you commit to getting the repairs done. Labour costs vary between different mechanics and shops, so ask for discounts and make sure you find a competitive offer. Don’t forget to check for appropriate accreditations and glowing reviews before you choose an auto shop.
What does auto repair lending cover?
That depends on which type of car repair loan you get. If you use a personal loan, vehicle title loan, credit card or payday loan to cover car repair costs, you can use the loan funds for any legitimate purpose associated with the repair, including parts, labour and transportation while your vehicle is in the shop.
On the other hand, if you get auto repair financing through your repair shop, the loan funds can typically only be used to cover the cost of the repair (including parts and labour) as listed on the repair quote or invoice. That’s because your repair shop will typically partner with a third party lender to offer financing based on the exact repair costs from that garage.
Types of vehicles covered under auto repair loans
Most types of vehicles will be eligible for standard auto repair lending, especially if you’re applying for a generic personal loan. For the most part, you can use the funds you’ve borrowed for any legitimate purpose, including auto repairs.
The most common types of vehicles covered under auto repair loans include new and used cars, trucks, motorcycles, SUVs or minivans. Specialty vehicles, like recreational vehicles, motorboats, snowmobiles and ATVs, can often also be covered under car repair loans.
You may find that repairs to specialty vehicles require more financing and longer repayment terms. Make sure you compare lenders to find the best choice to suit your needs.
How to save money on car repairs
Car repairs are a costly expense, but there are things every car owner can do to save on the total bill. Here are key tips you can try:
Compare your options
Do your research, look through reviews and ask for recommendations to create a shortlist of mechanics that are honest, reliable and reasonably priced. Obtain quotes from each auto repair shop and compare between each service provider. You may find one charges the best rate and provides the services you need to get the job done. Don’t be shy and ask mechanics if they have any discounts they can apply as well.
Get familiar with common car repairs
Understand how your vehicle works and figure out which minor repairs can be a DIY project. These days, you can rely on YouTube, vehicle blogs and other specialty sites to guide you through doing basic repairs yourself. Just make sure to save the more complicated work for a professional.
Buy your own parts
A mechanic may provide you with a quote that includes parts and labour. You may be able to find the parts you need for far less than your mechanic’s quote. Before making any purchases, double-check that your mechanic will allow you to supply parts for them to use in the repair process.
Use warranties and insurance to your advantage
Before buying new parts or paying for labour, check your warranty and car insurance policy to see if you can claim any purchases or expenses. If you were involved in an accident, some insurance policies will cover the costs of your repairs. Depending on your insurance policy and provider, you may have zero, partial or full coverage for the repair.
Don’t ignore the warning signs
A major way to avoid common repairs is to take your vehicle in for routine maintenance. It might be costly to visit the mechanic when the check engine light comes on, but getting work done pre-emptively will save you money in the long run.
Once you’ve found a shop, stick with it
This should go without saying, but your relationship with your mechanic is a crucial component of getting good service at reasonable prices. Find a shop you trust and visit it whenever you have an issue with your car.
Other ways to finance auto repairs
Using a loan or a credit card can be a quick way to cover the costs of your car repair, but it may not be the cheapest. In order to get the best deal, consider some of these alternatives first.
Borrow from friends or family. If you need a small sum of money to cover car repairs, you could seek out financial assistance from relatives. They could also help you in other ways, such as lending you their car, bicycle or bus pass to help you commute to work and home until your car is repaired.
Connect with local charities. Check out local resources, such as government agencies, non-profits and charities that may offer free financial assistance to help those in need. If you’re a single parent, on a low-income or have a disability, for example, there may be community resources that can help you.
Buy now pay later (BNPL). Some mechanics and auto repair shops may offer a BNPL program to help you get your car back on the road without breaking the bank. Check the fine print to make sure you aren’t incurring massive interest rates following a promotional period though.
Request a payment plan. Some mechanics understand that you might not be able to afford to pay your bills on the spot. Ask if they have payment plans, but be sure to get your agreement in writing, and every time you make a payment, keep track of it and acknowledge that you have sent the payment and it has been received. With a payment plan, you’ll have longer to pay for your repairs and get your finances in order without adding extra costs in the form of interest rates and fees from a loan.
Should I repair my car or replace it?
Even if we may like to keep our cars running for as long as possible, there comes a time when it makes more financial sense to replace it rather than repair it. That’s especially important to consider before going into debt with a car repair loan, which could mean paying even more due to interest charges.
A good rule of thumb to decide if a car repair is worth the cost is to look at the total repair cost (including any interest on a car repair loan) and compare that to the value of the vehicle. If the car is worth less than then cost of the repair, it’s likely worth upgrading your vehicle rather than repairing it.
Bottom line
It can be devastating to have your car break down and not have the cash to fix it, but there are options for car repair loans you can consider to cover the cost of repairs and get your vehicle back on the road. Compare auto repair lenders and loan options before making a commitment. Also, most importantly, don’t hesitate to ask for help when you need it.
Frequently asked questions
Some dealerships offer financing for vehicle repairs, but this isn't a common route in Canada. Usually, dealerships provide financing to help with purchasing your vehicle, either through in-house financing or by partnering with local lenders. If you're interested, simply call or visit your dealer's website to see if it provides financing to pay for repairs.
Some do. It's worth asking your auto repair shop, or visiting its website, to see if it offers in-house financing or works with a partnered lending company to provide car repair loans. While securing financing through your mechanic may seem convenient, double-check that the rates and terms they're offering are competitive compared to other options.
Yes, but be prepared for high interest rates. You have a few ways to finance your car repairs if you have bad credit: personal loans, car title loans and payday loans. Payday loans are the most expensive, so only use them as a last resort.
There are many free websites online that can help you estimate what your car is worth, and you might be able to find websites that will help you determine the trade-in value of your car.
It depends on your provider and the type of insurance coverage that you have. If you have comprehensive and collision coverage, the answer is most likely yes. If you have basic insurance, you may not be covered. Contact your insurance provider and find out about your coverage. You may find that you have partial coverage instead of full coverage, which can still provide some necessary financial relief.
Carmen Chai is a freelance writer at Finder, specializing in financial products. She is an award-winning Canadian journalist who has lived and reported from major cities such as Vancouver, Toronto, London and Paris. She has reported on personal finance, mortgages, and banking products for nearly a decade.
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