Best Car Loans in Canada (2026): Compare Rates and Lenders

Car loan rates in Canada vary more by lender type and credit score than by almost anything else. Banks, credit unions, dealers and online lenders each have advantages depending on your credit and the car, and a used car usually costs more to finance than a new one. This page compares car loan rates by lender and by credit score, how the term changes the total cost, and options for bad credit and refinancing. It is part of the personal loans, lines of credit and car loans hub.

Car Loan Rates by Lender Type

New Vehicle Financing

Used Vehicle Financing

Rates vary by credit score, down payment and vehicle. The legal maximum is the federal criminal interest rate, explained on bad credit loans.

How the Loan Term Changes the Total Cost

Car Loan Rates by Credit Score

Your credit score usually moves your car loan rate more than any other factor.

The table gives no rates because they vary by lender and change over time, so the size of the gap between bands depends on the quote. The score factors within your control are on-time payments, card balances below about 30% of their limits, few new credit applications, and errors corrected on your credit report. The score lenders look for is covered in what credit score you need for a car loan, and how the loan then affects your score in does a car loan help your credit score.

Comparing Lender Types

Bank Car Loans

The Big Five banks (TD, RBC, BMO, Scotiabank, CIBC) are convenient for existing customers, and several of them offer car loans through dealerships. Their approval criteria can be stricter than a credit union’s, and there may be less room to negotiate.

Credit Union Car Loans

Credit unions can be more flexible on approval and may negotiate. You must be a member, some loans need an in-person visit, and some credit unions cap loan sizes.

Dealer Financing

Dealers arrange loans through manufacturers’ finance arms and through banks, and a manufacturer may offer a promotional rate such as 0% on selected new models through the dealer. Outside those promotions, dealer rates can be marked up above what the lender charges, and the finance office is where add-on products get sold. Comparing a 0% offer with taking the cash rebate and borrowing elsewhere is worked through in how to finance a car in Canada, and the add-ons to question in how to negotiate a car price.

Online Lenders

Online lenders are convenient and approve quickly, and many accept weaker credit. Their rates are often above banks’ and credit unions’, some charge fees, and some are referral services rather than lenders.

Getting Pre-Approved

A pre-approval from a bank or credit union gives you a rate to compare with the dealer’s and lets you negotiate the car’s price separately from the financing. Some lenders show an estimated rate after a soft credit check, which doesn’t affect your score; a formal application is a hard inquiry. The steps, documents and timing are in how to finance a car in Canada.

How Much to Spend

The car payment is only part of the cost: insurance, fuel, maintenance, registration and parking can match it. How much car fits a given income, including the 20/4/10 rule, is covered in how much to spend on a car, and the running costs in the cost of owning a car.

Car Loans for Bad Credit

With a score below 600, financing is still possible, at a much higher cost.

Refinancing a Car Loan

Refinancing can lower the rate on a high-rate loan once your circumstances improve.

Check the current loan for a prepayment penalty and the new one for fees before comparing. The payment on any amount, rate and term, with sales tax and a trade-in, is in the car loan calculator.

Financing a car: dealer or bank

Financing a car follows the same order whoever lends the money: set a budget, check your credit, get pre-approved, then compare the dealer’s offer with the pre-approval on the total cost of the loan rather than the monthly payment. This guide walks through each step, from the documents a lender asks for to the choice between 0% financing and a cash rebate, and the extra steps for a used car or a weaker credit history. It is part of our guide to buying a car in Canada.

Understanding Your Car Financing Options

The Main Ways to Pay for a Car

Leasing is a different contract from a loan, with its own costs at the end of the term. How leasing, financing and paying cash compare on the same car is covered in leasing vs buying a car in Canada.

Step 1: Set Your Budget

A budget set before visiting a dealer is based on your own finances rather than on the largest payment a lender will approve. Rules of thumb such as 20/4/10, and the price range they give at different incomes, are covered in how much to spend on a car; the full monthly cost once insurance, fuel, maintenance and parking are added is in the cost of owning a car in Canada.

Step 2: Check Your Credit Score

Your credit history is one of the main things a lender uses to set your rate.

Free Ways to Check Your Score

Free score services such as Borrowell (which shows an Equifax score) and many banks’ apps show a score at no cost. Equifax and TransUnion scores can differ, because lenders don’t all report to both bureaus.

What Your Score Means for Financing

A higher score generally means a lower rate and more lenders willing to approve the loan, while a low score can mean a larger down payment, a co-signer or a subprime lender. Current car loan rates by credit score, and the lenders offering them, are compared in our best car loans guide.

If Your Score Needs Improvement

If the purchase can wait, a few months of steady credit habits can raise a score before you apply:

Step 3: Get Pre-Approved for a Car Loan

A pre-approval is a lender’s conditional offer of a loan amount and rate before you choose the car. It turns you into a cash buyer at the dealership and gives you a rate to compare with the dealer’s offer.

Why Pre-Approval Matters

Where to Get Pre-Approved

Pre-Approval Documents Needed

Step-by-Step Pre-Approval Process

Each application usually means a hard credit inquiry. Credit scoring generally treats several car loan inquiries made within a short period as rate shopping, so applications grouped together have less effect on a score than the same applications spread over months.

Step 4: Decide Between New and Used

New cars carry the full manufacturer warranty and are the ones offered with promotional 0% financing, while used cars cost less to buy and have already taken the steepest depreciation, usually at a higher loan rate. The trade-offs, including how much a car loses by age, are covered in new vs used cars in Canada; certified pre-owned and private-sale purchases are in the used car buying guide.

Step 5: Navigate Dealer Financing

How Dealer Financing Works

Dealers don’t usually lend money themselves. They arrange the loan with a lender (a bank, a manufacturer’s finance company or a subprime lender) and can be paid for arranging it, sometimes by adding to the rate the lender would otherwise charge.

Types of Dealer Financing

Dealer Financing Strategies

Red Flags at the Dealer

How to negotiate the car price itself, before financing comes up, is covered in its own guide.

Step 6: Understand Loan Terms

Interest Rate

Loan Term

At the same rate and loan amount, a longer term lowers the payment and raises the total interest:

Total Cost, Not the Monthly Payment

A dealer quote usually leads with the monthly payment, which a longer term can always make smaller. The total paid over the loan shows what the term costs.

Payments for any amount, rate and term can be worked out with the car loan calculator.

Down Payment

The Underwater Risk

Being “underwater” means owing more on the loan than the car is worth. A car loses value fastest in its first years, while the early payments on a long loan are mostly interest, so a small down payment on a long term leaves a gap.

If an underwater car is sold or written off, the owner pays the difference. GAP insurance pays the difference between the car’s value and the loan balance after a write-off, which is why it comes up most on long, low-down-payment loans. Rolling an unpaid balance into the next loan is covered in trade-in vs private sale.

Step 7: Compare 0% Financing vs a Cash Rebate

Manufacturers often offer either promotional financing or a cash rebate on the same new model, but not both. The rebate comes out ahead when it is larger than the interest you would pay on the smaller loan it leaves.

The answer turns on the rate you can get elsewhere, the size of the rebate and the term, so it is worth running both totals with your own figures.

Step 8: Finalize the Deal

Before Signing

An insurance quote before signing matters because premiums vary widely by vehicle, driver and province, and lenders on a financed car generally require collision and comprehensive coverage, so a payment that fits the budget can stop fitting once insurance is added.

Add-Ons in the Finance Office

The finance office is where optional products such as an extended warranty, GAP insurance, rust proofing and protection packages are offered, and each one adds to the amount financed and the interest paid on it. What each product is and what to compare it with is set out in our guide to dealer add-ons and fees; whether an extended car warranty is worth it has its own guide.

Documents You Receive

Financing a Used Car

How Used Car Loans Differ

Rates for new and used car loans from banks, credit unions and online lenders are compared in the best car loans in Canada.

Financing a Private Sale

Private sellers can’t arrange financing, so the buyer brings the money:

A private purchase also needs a lien search, so the loan you take on isn’t for a car that still secures the seller’s loan. The used car buying guide covers the lien check, CARFAX history report and paperwork.

Financing with Bad Credit

Options for Credit-Challenged Buyers

Improving Your Chances

Rebuilding Credit with a Car Loan

A car loan taken at a high rate can be refinanced once the borrower’s credit improves:

Common Mistakes

Summary: Car Financing Checklist

Related pages

• Line of Credit Calculator Canada