Frequently Asked Questions About Auto Loans in the GTA
Can I get a car loan with bad credit?
Yes, Canadians with bad credit can still get a car loan – just bear in mind that a poor credit score usually means that you’ll have to pay more in interest. While the average interest rate for a new car is around 3-4%, those with low credit can expect to pay between 5% and 15%.
How much of a down payment do I need to buy a new car?
Most people choose to put down 10-20% of the car’s purchase price as a down payment, but this isn’t necessarily required. Your lender will tell you if they have specific requirements about down payment size. Generally though, it’s smart to put down what you can, to save money on your loan.
Can I use a trade-in to lower my car loan?
Yes, most people can use their old car as a trade-in, as long as it is still road-worthy. The value of the traded-in vehicle then effectively becomes part of the down payment for your new car.
What’s the average interest rate on a used car?
You’re probably used to seeing ads for 0% interest loans for new cars, but such deals do not exist for used cars. Even the most qualified borrowers can expect to pay at least 4-5% on a used car loan; the average sits at around 6%.
What’s the average amount borrowed with an auto loan?
In Canada, the average amount borrowed for new car purchases is just over $32,000, and for used car purchases around $20,000. Most auto loan companies will be able to provide loans of as little as $5,000, or as much as $50,000.
What’s the average monthly cost for a car loan?
The average monthly outlay for a new car loan is $554, and for used cars is $391.
Can I get a car loan if I have no credit history?
Yes. Your best bet is to apply to bad credit/no credit loan companies that can cater specifically to people who are new to the country and have no credit history. You’ll probably have to pay more in interest, but by taking out a loan and paying it back properly, you’ll establish a credit history.
How can I lower my car loan costs?
There are a few ways to make a car loan more affordable:
- Borrow less or buy a cheaper car
- Find a lower interest rate
- Increase your down payment
- Add a trade-in to your car purchase
- Increase the loan term
- Refinance your loan
- Improve your credit score before borrowing