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How much is the average car payment in Canada?
Find out how much you can expect to spend every month to cover the average car payment in Canada.
Canadians will typically spend between $300 and $800 on the average car payment in 2021. Learn more about the different variables that affect your monthly car payments, and find out how you can get the best deal when you sign up for a new loan.
What is the monthly average car payment?
Your monthly average car payment in Canada will depend on a number of factors, such as the price of your vehicle, what interest rate you get and how long you take your loan out for. That said, you can expect to pay the following average car payment for a new or used vehicle based on the national average for each category.
|Car price||Interest rate||Term length||Monthly average car payment|
|New car||≈ $40,000||4.44%||5 years||$744.63|
|Used car||≈ $19,000||5.90%||5 years||$366.44|
Factors that affect your loan payment
The following factors can cause your monthly average car payment in Canada to fluctuate:
- Down payment. Experts recommend making a down payment of around 10% to 20% to reduce your average car payments. This will shorten your term and save you money on interest in the long run.
- Loan amount. The amount you borrow will affect how much the average car payment in Canada cost. The larger your loan principal, the more your monthly payment will be and the more interest you’ll have to pay.
- Interest rate. Interest rates are determined by your lender. You’ll usually get a lower interest rate if you have a good to excellent credit score. You’ll typically pay more if your score is below 650. New car loans also tend to come with lower interest rates than used car loans.
- Loan term. The term of your loan is how long you have to pay it back. The longer the term, the smaller your average car payment but the more interest you’ll owe in the long run (and vice versa for shorter terms).
- Fees. You may need to pay loan origination, late payment or early repayment fees depending on your loan. These fees can affect your average car payment if they are built into the overall price of your loan.
Can I afford the monthly car payments?
Use this calculator to find out your potential monthly payment based on the loan amount, interest rate and loan term.
Car loan monthly calculatorCalculate how much you could expect to pay each month
|Loan terms (in years)|
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How much do Canadians spend on new cars by province?
The average price that Canadians spent on new cars and trucks as of June 2020 is outlined below. It is likely that these prices have increased marginally since these figures were last published.
|Location||Average car price||Average interest rate||Average car payment per month (3 years)||Average car payment per month (5 years)|
|Manitoba and Saskatchewan||$43,156||4.44%||$1,283||$803|
Snapshot of the average car payment in Canada
The table below shows an example of a typical loan cost and an average car payment in Canada for a new or used vehicle in 2021.
Average car payment
Total interest paid
As you can see, the interest rate plays a huge role in how much you’ll pay for your loan. It’s also important to note that used cars typically come with much higher interest rates, so you should keep this in mind when searching for a vehicle. That said, used cars also cost less so your monthly payments will be smaller even if you pay more interest.
What is a good car payment?
A good car payment is one that comes with a low interest rate and gives you a monthly payment that you can afford. Your overall price will be determined by the price of your vehicle so you should try to whittle that down as much as possible to get a good car payment.
A good rule of thumb is to only spend 10% to 15% of your disposable income on a car payment. This ensures that you have plenty of wiggle room to cover other expenses.
What is the average interest rate for a car loan?
According to Statistics Canada, the average car loan interest rate in Canada is 4.44%. The average buyer can expect to pay anywhere between 4% to 6% interest on their car loan, depending on whether the car is new or used and whether the interest rate is fixed or variable.
Examples of interest rates
The following example shows the amount of interest you could end up paying for a brand new $40,055 car assuming a loan term of 7 years and no down payment.
Interest rate (hypothetical)
Monthly interest average
Based on this analysis, a person with poor credit might have to pay over $20,000 more in interest over the course of their loan than a person with excellent credit. This is why it makes sense to build up your credit score before you sign on to a car loan.
How does my term length affect my loan payments?
Your term length will vary depending on how much you can afford to pay per month, as well as how long you’d like to pay off your loan. The average term length is between 3 and 5 years. That said, term lengths are extending more often to 7+ years, which means you’ll pay more interest over the course of your loan.
Examples of monthly payments for different loan terms
In the example below, we’ll look at how much your monthly payments will be for the same loan amount based on the length of your term. We’ll also look at how much you’ll pay in interest over the course of your loan.
As you can see, the cost of your monthly payments will go up as your term length goes down. That said, you’ll pay less interest over the course of your loan with a shorter term.
Additional expenses to think about
You’ll need to consider the following expenses in addition to your average car payment in Canada when budgeting for a car:
|Gas||You can expect to pay between $100 and $160 per month on gas (on average) depending on a number of factors, including your fuel economy and how far you drive.|
|Insurance||You’ll likely pay between $100 and $200 per month on car insurance depending on what type of car you have and how much insurance you need.|
|Emergency repairs||You can pay several hundreds up to several thousands of dollars for emergency repairs to your vehicle depending on the damage.|
|Routine maintenance||You may pay anywhere from $200 to $1,000 per year on routine maintenance. This can include oil changes, tire rotations, filter replacements and other repairs that keep your vehicle running smoothly.|
|Registration.||Registration and licensing fees can cost anywhere from $50 to $250 per year, depending on where you live.|
How to save on your average car payment in Canada
You can take the following steps to lower your average car payment in Canada:
- Make a larger down payment. Put more money down on your car upfront to lower your monthly average car payment.
- Compare prices to get the best deal. Compare multiple lenders and look for the lowest prices on the car you’re interested in to get the best deal on your loan.
- Negotiate with your seller or dealer. Ask your seller if they would be willing to give you a lower price for a quick sale or see if they’ll price match if you find a better deal.
- Trade another vehicle in. You can trade a used vehicle in with many dealers to knock thousands of dollars off of the purchase price of a new vehicle.
- Take a loan with a shorter term. You’ll pay less interest over the course of your loan with a shorter term (though you’ll have a higher monthly payment).
The amount of money you spend on your vehicle will depend on a number of different factors. As a rule of thumb, you should try to get the shortest term and the lowest possible interest rate. You can also consider buying a less expensive car, making a larger down payment and improving your credit score as ways to help lower your average car payment in Canada.
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