What is the minimum credit score for a car loan in Canada?

Major banks and credit unions in Canada typically require a minimum credit score of 620–650 for a car loan. Dealership financing through captive lenders (Toyota Financial, Ford Credit, etc.) can approve scores as low as 550–600 but at higher rates. Subprime auto lenders approve below 550 with proof of income and a larger down payment, typically at 15–29% interest.

What credit score gets the best car loan rate in Canada?

A credit score of 720+ typically qualifies for the best advertised auto loan rates from banks and credit unions. At major Canadian banks, auto loan rates for good-credit borrowers range from 6–9% (variable with prime). Below 680, rates typically start climbing — borrowers in the 600–650 range often pay 12–18% through dealership financing.

Can you get a car loan in Canada with bad credit?

Yes. Subprime auto lenders and dealerships specialize in bad-credit car loans. Common minimum requirements at these lenders are: minimum income of $1,500–$2,000/month, minimum 3 months at current employer, active Canadian bank account, and a down payment of 10–20%. Interest rates are typically 15–29% — a significant lifetime cost on a $25,000 vehicle.

Does a car loan affect credit score in Canada?

Yes, in both directions depending on how you manage it. Applying for the loan creates a hard inquiry (−5 to −10 points temporarily). A new car loan adds to your credit mix which is positive over time. Every on-time payment builds payment history (the largest scoring factor). Missing payments drops your score 50–100 points per missed payment.

Is it better to finance through a bank or a dealership in Canada?

For borrowers with good credit (680+), getting pre-approved by your bank or credit union before visiting a dealership gives you a competitive rate and negotiating leverage. Dealers earn revenue on financing markup — they may offer a lower vehicle price if you use their financing, but the interest cost often exceeds the discount. Compare total cost, not just monthly payment.

Do both credit bureaus get checked for a car loan?

In Canada, auto lenders typically pull TransUnion, though this varies. When shopping for rates at multiple dealerships or lenders, multiple hard inquiries within 14 days are generally treated as a single inquiry by Canadian credit bureaus for auto loan applications — limiting the score impact of rate shopping.

How long does a car loan hard inquiry stay on my credit in Canada?

Hard inquiries remain on your credit report for 3 years on Equifax and 6 years on TransUnion, but they only affect your score meaningfully for the first 12 months. After that, the impact fades to near-zero even though the inquiry is still visible.

What Credit Score Do You Need for a Car Loan in Canada? (2026)

Getting a car loan in Canada with a credit score above 680 is straightforward through most banks and credit unions. Below 600, you are looking at subprime financing with interest rates that can double or triple the cost of the vehicle over a 5–7 year loan term. This guide covers what score you need, what rates to expect, and how to improve your position.

Credit score requirements by lender type

Lender Type	Minimum Score	Typical Rate Range	Notes
Big 5 banks (TD, RBC, Scotiabank, BMO, CIBC)	650–680	6–10%	Best rates for 720+
Credit unions	620–650	5.5–9%	Often most competitive for members
Captive auto lenders (Toyota, Ford, VW Financial)	580–620	6–13%	Manufacturer 0% promos require 700+
Dealership subprime desk	500–550	12–20%	Income and down payment requirements
High-risk subprime lenders	No minimum (income-based)	20–29%	Very high cost; use only if rebuilding credit

How your credit score affects your car loan rate

Credit Score	Typical Annual Rate	Monthly Payment ($25,000 / 60 months)	Total Interest Paid
760+	6.5%	$488	$4,280
720–759	7.5%	$501	$5,060
680–719	9.0%	$519	$6,140
640–679	12.0%	$556	$8,360
600–639	16.0%	$609	$11,540
550–599	22.0%	$695	$16,700

The cost of bad credit on a car loan: The difference between a 760 score and a 580 score on a $25,000 car loan is approximately $12,000 in additional interest over 5 years.

Bank pre-approval vs. dealership financing

Getting pre-approved before you visit a dealership is the single most effective strategy for keeping your auto financing costs low:

Approach	How It Works	Advantage
Bank pre-approval	Bank pre-approves you up to a maximum amount at a set rate	You know your rate; dealer knows you have financing
Dealership financing	Dealer submits application to their network of lenders	Convenient; can approve lower scores; rate may be marked up
Credit union pre-approval	Often most competitive; apply online or in-branch	Can beat banks, especially for members

Dealer rate markup: Dealers can mark up the rate they receive from their lending partners (called “dealer reserve”). A lender offering 8% to the dealer may become 10–11% on the buyer’s paperwork. Ontario consumer protection rules cap dealer financing markups but they still exist.

Best strategy: Get pre-approved from your bank at, say, 8.5%. Then let the dealer try to beat it. If they can’t, use your pre-approval. If they offer 7.9%, take the dealer financing.

Manufacturer 0% financing promotions

Manufacturers occasionally offer 0% or very low rate promotional financing (e.g., “0% for 48 months”). These require:

Requirement	Typical Threshold
Minimum credit score	720–760+
Full-price or limited discount	Often no negotiation on vehicle price
Specific vehicle models	New models with higher inventory only
Income verification	May be required

0% financing is genuinely valuable — it eliminates interest entirely — but only if you qualify and the vehicle price is fair without additional discounts you may sacrifice to get the promo rate.

What to do if your score is too low

Option 1 — Wait and rebuild (best long-term outcome)

Pay down credit card balances below 30% utilization: 1–2 months to show improvement
Keep all existing accounts current for 6 months
Resolve any outstanding collections
A 580 score can reach 640+ in 6 months with focused effort

Option 2 — Larger down payment Subprime auto lenders are more willing to approve lower scores with 20%+ down. The larger down payment reduces their risk. On a $25,000 vehicle, a $5,000 down payment (20%) significantly improves approval odds for scores in the 550–600 range.

Option 3 — Co-signer A co-signer with strong credit (700+) can qualify you for A-lender rates. The co-signer is equally responsible for the debt — any missed payments affect both credit files. This is a significant commitment to ask of someone.

Option 4 — Used vehicle at subprime (short-term credit rebuilding) Some Canadians finance a lower-cost used vehicle ($8,000–$12,000) through a subprime lender at high interest specifically to build installment credit history. After 12–18 months of on-time payments, the score improves enough to refinance at a lower rate or qualify for better credit products.