Buying a car is a considerable expense. If you plan to buy a car, consider applying for a loan. Banks and lending institutions offer loans at attractive rates for purchasing a car. However, they charge interest on the money they give you as a loan, and you must repay it on time. Several factors determine the interest rate of a car loan. In this blog, we’ll explore current car loan rates Canada and the factors affecting them.
What You Should Know About Car Loans?
- You can buy a car by borrowing money as a loan and repaying it in monthly installments.
- The best sources of car loans are banks and car dealerships.
- Lenders charge interest based on your credit score, car type, and loan features.
- There are many pre-approved loans that you can get for buying a car.
- People with good credit scores can get a car loan at more favorable interest rates.
- Paying off the loan on time is essential as it might affect your payment history and credit scores.
- You should take a car loan for a popular and reliable car model that has less depreciation value.
What Are The Average Current Car Loan Rates Canada?
The average current car loan rate Canada is 7.21 percent. However, only some car buyers need to pay the same interest rate. The type of car, cost of the car, and other factors may impact the interest rate. The interest rate can be more for some buyers or less for some. People who have a good credit score can get to pay less interest.
Current Car Loan Rates Canada In Different Provinces
The current car loan rates Canada are the same regardless of location. There can be minor differences in the interest rates in different provinces. However, the lenders charge almost the same interest rates. This is because the prime rate in the country remains the same in all provinces. Based on that, lenders use the same rate and charge interest on a car loan. Most lending financial companies offer services across Canada and charge the same interest rate.
Used and New Car Current Car Loan Rates Canada
- Lenders in Canada generally charge a high interest rate on used car loans. Current car loan rates Canada range from 8-10% for buying a used car.
- Canada’s current car loan rates range from 0-7.5% for a new car loan. The rates may vary depending on the type of car you buy.
Current Car Loan Rates Canada for Best Car Dealerships
You can get a car loan in Canada from the following lenders.
|Lender||Type of car||Interest Rate||Loan Term||Eligibility|
|Loans Canada||new and used car||0.99% – 46.96%||3 – 60 months||Monthly salary $1,800, 3+ months employed|
|Cars Fast||new and used car||3.90% – 29.90%||12 – 96 months||Monthly salary $2,000, 3+ months employed|
|Loan Connect||new and used car||6.99% – 46.96%||72 – 84 months||No minimum income needed|
|Kawartha Credit Union||cars that are five years old/new||7.99%||Up to 5 years||Undisclosed|
|Clutch||used car||From 8.49%||12 – 96 months||Employment for 3+ months, Max.1 bankruptcy, Ontario & Nova Scotia only|
|Duca||new car||From 6.9%||1 – 5 years||Undisclosed|
|WFCU Credit Union||new car||6.99%||Up to four to eight years, based on your car’s year||Undisclosed|
|Canada Auto Finance||new and used car||4.90% – 29.95%||3 – 96 months||Minimum monthly salary $1,500, 3+ months employed|
|Drive Away||new and used car||3.90% – 29.99%||12 – 96 months||Minimum monthly salary $2,500, employed|
|NLCU||new and used car||5.50% – 7.80%||Three to eight years for a new car and three to five years for a used car||Undisclosed|
Current Car Loan Rates Canada According To Car Brands
|Car Brand – In-House Financing||APR (60 months term|
Current Car Loan Rates Canada Offered by Banks
Banks’ car loan interest rate is not declared on their official web portals. However, we can get an idea about the current car loan rates Canada on the TD Wheels App. According to the app’s October 4, 2023 data, car loan bank rates are as follows.
- Toyota Corolla: The interest rate is 8.49% for a car loan of 24-72 months. The interest rate is 8.99% for a loan of 84 months and 9.49% for a loan of 96 months.
- Honda Civic Sedan: The interest rate is 8.49% for a loan of 24-72 months. The interest rate is 8.99% for a loan of 84 months and 9.49% for a loan of 96 months.
- Chevrolet Bolt EV: The bank charges an interest rate of 5.99% for a car loan of 12-84 months.
- Ford F-150: The car loan interest rate is 8.49% for 12-72 months. The interest rate is 8.99% for a loan of 84 months and 9.49% for a loan of 96 months.
How Do Lenders Determine Your Interest Rate?
Lenders in Canada determine the car loan rate based on several factors. Let us know about the factors in detail.
- Car Loan Term
The time duration of a loan impacts your interest rate. If you take a loan for a longer time, you need to pay more interest. Also, it increases the overall cost of the vehicle. You have to pay more monthly monthly if you take a short-term loan. The best solution is to take a loan for a term period of 5 years.
- Credit score
It is essential to check your credit score if you plan to apply for a car loan in Canada. Lenders check your credit score to know whether you have paid off your earlier debts. A low credit score alarms the lenders, who may consider you risky. Thus, they will charge you a high interest rate. However, people with a good credit score need not worry about current car loan rates Canada. They are charged less interest than those with a bad credit score.
- Monthly income
Banks check your monthly income to know your ability to repay a loan. Generally, lenders hesitate to approve a loan over 18% of your monthly salary.
- Down Payment
A down payment is the money you pay for a car upfront before making the full payment. It is usually 20% of the cost of the car. People who pay a large down payment get a lower interest rate. On the other hand, people who pay less down payment have to pay more interest. Also, the interest is more if you buy a car on a loan without a down payment.
- Stable job or regular source of income
You need to pay less interest if you have a stable job or regular source of employment. Lenders believe you can repay their money with a stable income. They may check your bank statements and proof of employment to confirm this. Lenders approve the loan easily if your job or employment is stable.
Ways To Lower The Interest Rate On A Car Loan
Getting the best car loan rates Canada is possible if you meet the lenders’ criteria. You can lower your rate on a car loan by considering the following things.
- Have the best credit score
Try your best to maintain a good credit score if you plan to apply for a car loan. Check your credit score and credit history. Also, check and pay off any pending payments. It will increase your credit score. Also, it can prove your creditworthiness to the lenders. The lenders charge less interest if your credit score is good.
- Make a large down payment
First, inquire about the current car loan rates Canada. After that, make a down payment. Thus, you’ll need to borrow less money. Lenders charge less interest if you pay a large down payment.
- Choose a smaller loan term period
Lenders charge less interest if you take a loan for a short period than a longer term. They don’t have to wait for long as you pay off their money in a short time. You may have to pay more for the monthly installments. But it will also reduce the interest rate and the overall cost.
- Get a co-signer
Applying for a car loan with a co-signer is the best option if your credit score is not good. It is also helpful if you can’t pay a down payment. Having a co-signer assures the lenders that it is okay to approve the loan despite them considering you as risky. It will make loan approval easier.
A car loan is the best option for buying a car when you don’t have cash. Buyers should know the factors determining the interest on a car loan. Check Canada’s current car loan rates and compare different providers before applying. Compare the benefits of buying a used or new car and then decide to buy one.
What is a good credit score in Canada for a car loan?
Lenders who offer car loans in Canada prefer granting loans to people with credit scores in the mid-600s. A credit score of 650 and above is considered suitable for a car loan in Canada. However, some lenders may need to be more adamant about a borrower's high credit score. Also, some car dealerships may help car buyers get finance for their specific credit requirements. So, people who have a score less than 650 may still be able to get a car loan.
Is a 72-month car loan bad?
There may be better choices than a 72-month car loan for a car buyer. This is because a loan for a more extended period usually has a higher interest. It is better to take a loan for a shorter period. You can consider taking a loan for 60 months instead of 72 months.
Is it better to get a car loan from a bank or dealer in Canada?
Get a car loan from a dealer if your credit score is good. They offer promotional interest-free financing that may help you save money.
How to get the best interest rate on a car loan in Canada?
– Check your credit score first. Compare the interest rates of multiple lenders.
– Apply for pre-approval and then contact a car dealership.
– Analyze the overall cost of the car instead of just the monthly payments.
– Negotiate the interest with the lender.
– Do proper research and then choose a lender instead of going for the first deal you are offered.
– Make sure that you know the terms and conditions of the loan contract.
– Lastly, getting a co-signer may help you get a loan if you have a low credit score.
Who is offering zero percent financing on cars in Canada in 2023?
Car dealerships offer zero percent financing on car loans in Canada. Banks and other types of financial lenders do not provide zero-percent financing. The car dealerships get more sales when they offer a car loan at 0% interest.
The lowest rate, 0.99%, is available from the auto manufacturers Chevrolet, Ford, and GMC. But, the deals may vary from region to region. Check out the brand sites for detailed deals.