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How much is the average car payment in Canada? 

Looking to purchase a new vehicle? Find out how much you can expect to spend every month to cover your car payments.

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car loan

Canadians will typically spend between $300 and $600 on car payments every month, depending on a number of factors. These numbers also go up every year, as vehicles become marginally more expensive and interest rates increase. Find out how much the average car payment is in Canada and how much you can expect to pay for your car loan, and what variables tend to influence your overall cost.

What is the monthly average car payment?

It’s difficult to say how much you’ll pay every month for a new vehicle in Canada. The average price of a new vehicle in 2020 is $40,055 while the average cost of a used vehicle is $18,980, according to the Auto Trader price index. The amount you’ll pay for your loan, no matter how much you owe, will depend on a number of factors.

Factors that affect your loan payment

  • Down payment. Experts recommend making a down payment of around 10% to 20% to reduce your monthly 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 your monthly payments 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 based on a percentage of the amount you borrow. 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.
  • Loan term. The term of your loan is how long you have to pay it back. The longer the term, the smaller your monthly payment but the more interest you’ll owe in the long run. The shorter the loan term, the more you pay towards your principal and the less you pay in interest.
  • New or used. New cars tend to have lower interest rates than used vehicles. The average customer can expect to pay anywhere between 4.5% and 6% interest on a vehicle, while those with poor credit may need to pay rates as high as 30%. Read more about new vs used cars in our guide.

What does the average car payment look like in Canada?

The table below breaks down how much you might have to pay for a new or used vehicle in 2020. It factors in several variables that affect how much you’ll pay for your loan.

New cars

Used cars

Loan amount

$40,055

$18,980

Interest rate

4.27%

8.95%

Loan term

60 months

60 months

Down payment

$10,000

$5,000

Monthly payment

$629.61

$327.54

Total interest paid

$3,814.53

$3,855.29

Credit score

GoodGood

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 new vehicle. That said, used cars also cost less so your monthly payments will be smaller even if you end up paying more interest.

What is the average interest rate for a car loan?

The average buyer can expect to pay anywhere between 4.5% 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.

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.

Credit rating

Credit score

Interest rate (hypothetical)

Monthly interest average

Total interest

Excellent

760-900

3.49%

$69.28

$5,819.12

Very good

725-759

3.99%

$79.64

$6,689.43

Good

660-724

4.5%

$90.32

$7,586.55

Fair

560-659

10%

$212.57

$17,855.89

Poor

300-559

15%

$334.58

$28,104.51

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.

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.

Loan amount

Loan term

Interest rate

Monthly payment

Total interest

$40,055

3 years

4.27%

$1,341.76

$3,041.29

$40,055

5 years

4.27%

$839.10

$5.083.71

$40,055

7 years

4.27%

$624.32

$7,180.79

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.

Compare your car loan options

Name Product Min. Loan Amount Interest Rate Loan Term Min. Credit Score Requirements
CarsFast Car Loans
$500
4.90% to 29.90%
12 months - 8 years
300
Gross 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.
Car Loans Canada
$7,500
3.99% to 29.95%
12-84 months
300
3+ months employed, min. income of $2,000/month
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.
Loans Canada Car Loans
$500
0% to 29.99%
3-96 months
300
Employed for at least 3 months, min. income of $1,800/month
Get access to financing from multiple lenders across Canada through a single application with Loans Canada. Bad credit, CERB and EI borrowers are considered.
Carloans411 Car Loans
$500
1.90% to 19.99%
Up to 72 months
300
Employed for 3+ months, min. income of $1,600/month
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.
LoanConnect Car Loans
$500
10.00% to 46.96%
6-60 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.
Auto Arriba Car Loans
$500
8.99% to 29.50%
6-84 months
N/A
Currently employed for 3+ months
Auto Arriba offers car loans starting at $500 up to $100,000, with as little as a 30 minute loan turnaround time. On a limited number of approved loans, Auto Arriba is currently offering a rebate of the amount of your first scheduled payment 30 days after it has been processed up to a maximum of $500.
Fairstone Secured Personal Loan
$5,000
19.99% to 23.99%
3-10 years
560
Have an established credit history and own your home
Fairstone offers secured personal loans up to $35,000.
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Compare up to 4 providers

Bottom line

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 the overall cost of your vehicle.

Frequently asked questions

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