Car Loans

Getting a car loan in Canada is easy when you deal with the top auto loan providers in the country. Every company listed on Smarter Loans has been reviewed and qualified by a panel of industry experts. This means that when you deal with these auto financing companies, you can be sure you work with trusted lenders. If you are looking for a car loan in Canada with easy approval even if you have less than perfect credit, we can help.

Cars, SUV’s, Trucks, Motorcycles, ATV’s, RV’s, Boats/Yachts, Motorsport, Semi-Trucks and other vehicles are available.

Choose one of the vehicle loan companies below to be taken to their application or Pre-apply online here and we will connect you with a suitable lender for your auto loan.

Pre-apply for a car loan here at Smarter Loans and we will find a suitable lender for you.

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Top Car Loans Providers in Canada

Interest Rate
$7,500 - $55,000
2.95% - 29.95%
12 - 96 months
Up to $50,000
$10,000 - $75,000
12 - 96 months
$7,500 to $50,000 (Refinance your existing auto loan)
8.99% to 19.99% (lower your auto loan interest rate)
Up to 84 months

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What is an Auto Loan and How Does it Work?

An auto loan serves as a debt instrument that enables consumers to acquire motor vehicles through structured financing. These loans are repaid in periodic car loan payments, often secured by the underlying vehicle, which acts as collateral. This means that the lender can seize the vehicle if the borrower fails to meet the scheduled principal and interest payments.

Auto loans are structured similarly to other consumer loans provided by lending institutions, like a bank or credit union. The loan consists of a principal, which corresponds to the vehicle’s value and the payment required. In some cases, used car financing may not necessitate a down-payment; however, when applicable, a larger down-payment reduces the principal amount, lowering the borrower’s costs and the lender’s risk. For example, a used car worth $5,000 may require a 10% down-payment of $500, after which the lender finances the remaining $4,500 to facilitate the purchase of your vehicle.

Car Loans Canada

Interest represents the cost of borrowing and serves as compensation for the lender’s risk in offering credit approval. Although there is no fixed interest rate for auto loans, the rate is determined by the lending institution and the borrower’s creditworthiness. Higher-rated customers receive competitive interest rates, while lower-rated borrowers pay more. Credit history plays a crucial role in securing favorable car financing options.

Loan payments are structured as installments, typically paid monthly over a period of 36 to 60 months. The installment nature of these loans renders them amortizing, with each payment covering both the principal and interest. As a result, used car financing becomes more affordable over time, as interest rates are applied to a decreasing outstanding principal.

Auto loans are a popular method for financing new or used vehicles. They offer flexible payment options, and borrowers can secure loans through banks, credit unions, or local dealerships. Factors such as credit history, payment date, and loan contract details impact the loan terms. With the possibility of extending repayment up to eight years, auto loans provide consumers with manageable solutions for purchasing vehicles.

Take the first step towards your dream car today and use our user-friendly car loan calculator to quickly estimate interest rates and monthly payments, making the path to car ownership smoother than ever.

Transunion published a report noting that the average Canadian consumer held $21,216 in auto loan debt at the end of 2019, an increase of 2% from the same period of 2018.

What is the difference of a Car Loan compared to leasing?

Auto leases present an alternative to auto loans, where the lessee obtains the right to use a vehicle for a predetermined period or a set number of miles driven. During the leasing period, the ownership of the car remains with the lessor, and the lessee returns the vehicle when the lease term expires. Some local dealerships may offer an option for lessees to purchase the vehicle at the end of the lease if they desire.

Since auto leases do not provide ownership benefits, car loan payments for leases are typically lower than payments for auto loans, making them more affordable for many consumers. This affordability is further enhanced by competitive rates offered on lease contracts.

Used car financing, including a used car loan and leases, cater to those looking for previously owned vehicles. These financing options give customers access to car loan options with varying terms and conditions. The loan payments are determined by factors such as the purchase price, the borrower’s creditworthiness, and the loan term.

In both auto loans and leases, borrowers can choose from various car loan options, depending on their needs and financial circumstances. These options may include new or used vehicle financing, personal loans, or dealership financing.

Auto leases offer an alternative to traditional loans for a new or used car, with lower payments and temporary vehicle use privileges. Consumers can explore various car loan options, including a used car financing and lease, to find the most suitable financing solution for their needs. Local dealerships often provide competitive rates and flexible terms, ensuring that customers can obtain the best deal possible for their vehicle purchase or lease.

If you are looking for additional info on “shopping for car loans” you should check out this great resource from the Government of Canada website.

Key Advantages of Auto Loans

Car loans provide compelling benefits to the borrower. Some of these are as listed below:

Assert Your Ownership

With each used car loan payment made, the borrower moves closer to owning the vehicle at the end of the loan term. This allows the individual to experience the benefits of ownership, such as making vehicle modifications or selling the car after the loan term. This is in contrast to leasing, where the lessee only pays for the right to use the car during the lease period.

Car Loans - Smarter Loans

Refinancing Opportunities

Benefiting from dropping interest rates or an improved credit score, borrowers can refinance their existing loans to secure lower monthly payments. A loan for a new or used car allows individuals to adjust their finances in response to favorable market conditions or personal financial improvements.

Insurance Protection

In the event of a vehicular accident, the insurance coverage for a loaned vehicle is based on the car’scurrent value. Conversely, with leased vehicles, the dealer’s repair costs often exceed what insurance companies are willing to cover, leaving the lessee responsible for the payment balance.

Drive Limitlessly

Unlike an auto lease, which may impose a mileage cap to prevent excessive wear, there is no limit on the miles driven when getting used car financing through a used car loan. It offers borrowers the freedom to drive as much as they desire.

Early Payoff Advantages

Paying off a new or used car loan early offers more than just an enhanced credit score. Provided that the lending institution does not impose early payoff penalties, borrowers can save on interest costs by settling their used car loan ahead of schedule.

Auto loans offer a range of benefits, from asserting ownership to enjoying limitless driving. Borrowers can secure financing through various means, such as pre-approval or negotiating with individual sellers, and can even refinance their loans or pay them off early to save on total costs. With good credit and careful planning, obtaining a great car through finance options like Kijiji Autos becomes a straightforward process.

How to Apply for a Car Loan

Getting a used car loan or a new car loan in Canada can be a smooth process if you know what steps to take and what to consider while applying. Next, we will provide you with detailed information on how to get a car loan, along with insights on finance and pay options for both new and used vehicles.

Preparing for Your Car Loan Application

Assess Your Financial Situation

Before applying for a new or used car loan, it’s essential to evaluate your financial standing. Determine your budget and consider the amount you can comfortably pay for your next car. Keep in mind that the full purchase price of the vehicle will include taxes and fees, in addition to the loan amount.

Explore Financing Options

There are several financing options available to Canadian car buyers, whether you are planning on purchasing a new or used car. You can obtain a car loan from banks, credit unions, local dealerships, or online lenders. Research the pros and cons of each option to determine which one suits your needs best.

Check Your Credit

Your credit score plays a crucial role in securing a new or used car loan, as it influences the interest rate and loan terms you’ll be offered. It’s essential to review your credit report before applying for a car loan to ensure there are no errors or inaccuracies that could negatively impact your application.

Boost your credit score and unlock better loan opportunities!

Choosing the Right Vehicle

New or Used Vehicle

Decide whether you want to buy a new or used car. Each option has its pros and cons, and your choice will impact your options when you finance and pay for your car. Used cars often have lower finance prices but may require more maintenance, while new cars come with warranties and the latest features.

Private Seller or Local Dealership

You can buy a car from an individual seller or a local dealership. Private sellers may offer lower prices, but you’ll need to handle the paperwork and may have to deal with potential issues from the previous owner. Dealerships, on the other hand, offer a more structured buying process and may provide finance and pay options and extended warranties.

Applying for a Car Loan

Get Pre-Approved

Obtain pre-approval for your car loan before heading to a dealership or contacting a private seller. Pre-approval gives you an idea of the loan amount you’re eligible for and the interest rate you can expect, allowing you to negotiate better terms and streamline the car purchase process.

Gather Necessary Documents

When applying for a car loan, you’ll need to provide several documents, including proof of income, proof of residency, and a valid driver’s license. If you’re applying for a personal loan or a car finance option from a credit union or bank, they may also require additional paperwork, such as bank statements and employment history.

Complete the Loan Application

Whether you’re applying for a car loan online or in person, you’ll need to fill out a loan application. This will typically require your personal information, financial details, and information about the new or used car you’re planning to finance. Submit the application along with the required documents and wait for the lender’s response.

By following these steps, you’ll be well-prepared to get a car loan and secure the financing you need for your next vehicle.

Factors to Consider when Applying for Auto Financing

However, there are also certain features that can pose risks to prospective borrowers:

Financial Pressure:

In comparison to auto leasing, auto loans generally involve higher principal payments due to the transfer of ownership to the borrower. This means that monthly payments, whether semi-monthly or bi-weekly, are often more expensive than leasing terms.

  • Initial Hurdle:

    Many lending institutions require a down-payment before underwriting an auto loan. For borrowers facing financial constraints or those who haven’t been pre-approved, this may not be a feasible option to pursue given the size of the deposit.

  • Depreciating Asset:

    Unlike property markets, automobiles are subject to depreciation almost immediately after leaving the dealership. For borrowers seeking to upgrade to a new vehicle after the term of the loan, this may not be the most attractive option, as the selling price will likely not reflect the initial buying price. This discrepancy can impact the total cost of ownership.

  • Maintenance Costs:

    As vehicles age, they often incur higher maintenance expenses. When opting for an auto loan rather than a lease, the borrower/owner is responsible for these costs. This factor should be considered alongside fixed or variable rate options during the loan application process.

When faced with unexpected emergencies like a car breakdown, don’t let financial worries hold you back – apply for an emergency loan to quickly get your car fixed and back on the road in no time.

Auto Loans Key Variables

Before borrowing for a car loan, there are some important variables to pay attention to that will ensure a mutually healthy relationship between lender and borrower:


When shopping for a loan, the Annual Percentage Rate (APR) is often the most critical consideration for most used car loans, which illustrates the amount of interest that the borrower has to pay on loans. A difference of even 0.2%-0.3% could possibly mean hundreds of dollars in savings over the life of the loan, impacting the overall finance cost. Be sure to ask your bank or credit union about this percentage rate.

Monthly Payments:

The total monthly payment, including your principal and interest amount, is a function of APR, principal amount, and the term of the loan (duration that the borrower has taken the loan out for). To optimize this, it is best to use a loan calculator before making the first payment to determine the total loan amount.

Total Amount/Down-Payment:

The total amount borrowed depends on the market value of the used vehicle being bought, as well as applicable fees and taxes. The higher this cumulative amount, the higher the monthly payment will be – although a down-payment can help to reduce that if the borrower has the financial capacity to do so.

Penalties and Other Fees:

While some institutions have more relaxed policies on early payoff, others charge a prepayment penalty. There are also processing or administrative charges that borrowers often have to pay to compensate the bank for the work undertaken in setting up the loan. While these are mostly fixed fees, they can sometimes be charged as a percentage of the loan. It is therefore extremely important to read the “fine print” of the loan documentation to gain an understanding of the total cash outflows the borrower is liable for.

Loan Terms:

The length of the loan is another consideration. Longer loan terms mean smaller monthly payments, but the offsetting factor is that the amount of interest paid is greater over the total period of the loan, which could impact your decision to buy a car.

To get the best deal on your next car, it’s essential to have a government-issued photo ID, a good credit check, and complete a thorough loan application. Consider seeking pre-approval and negotiating with private sellers for more favorable terms. Additionally, don’t forget to factor in the costs of extended warranties when calculating the overall expenses associated with your vehicle loan. By paying close attention to the loan details, you’ll be better prepared to pay off your loan and enjoy your newly purchased vehicle.

Car Loans Frequently Asked Questions

Qualifying for a car loan in Canada: What are the requirements?

To qualify for a car loan in Canada, you need to meet certain eligibility criteria, including a minimum credit score (usually 550), a valid driver’s license, proof of Canadian residency, and proof of income. Lenders may also require information about your other debts and monthly costs. If you don’t have a Canadian credit history, you can still get a car loan, but you may need to provide additional documentation or secure a cosigner.

What is a good interest rate for a car loan in Canada?

Interest rates for car loans in Canada vary widely, ranging from 0% to 30%. Used cars often have higher interest rates than new vehicles. Car manufacturers, financial institutions, and online lenders may offer more competitive interest rates than traditional financial institutions. Your interest rate depends on factors such as your credit score, monthly income, deposit, vehicle specifics, and loan terms.

Can I get a loan with bad credit in Canada?

Yes, if you want to buy a car, you can get a car loan in Canada even with bad credit. While many lenders require a minimum credit score of 550, there are options for those with lower scores. Consider exploring our list of bad credit car loan lenders to compare your options. Keep in mind that bad credit loans typically come with higher interest rates.

What are my car financing options with no credit in Canada?

Yes, new Canadian residents with no credit history can still obtain a car finance. Lenders may consider factors like proof of employment, the deposit amount or a cosigner with a Canadian credit history when evaluating your loan application.

Is it safe to fill out a car loan application online?

Completing a loan application online is generally safe, as most reputable online lenders use encryption to protect your personal and financial information. Make sure to review the lender’s privacy policy and ensure you’re working with a trustworthy company.

How do I get a car loan in Canada?

Start by finding a suitable lender based on your loan requirements. Compare loan terms , and gather the necessary paperwork, which typically includes proof of insurance, proof of income, proof of residency, and a driver’s license.

Can I get a loan to buy a used car in Canada?

Yes, used car financing is available in Canada through car dealerships, financial institutions, and online lenders. While the borrowed amount is usually less for used cars, the interest rate may be higher due to the shorter loan term.

Canada auto financing facts

Canada is home to a busy auto market, and a busy car loan market. Let’s look at the numbers:

  • The average car loan interest rate in Canada is 4.5-6%.
  • Bad credit borrowers pay on average 7-20% on their car loans.
  • The average car loan term is 69 months for new cars, and 65 months for used cars.
  • 55% of new car loans in the country have terms of 84 months or longer.
  • The average price of a new car in Canada is $33,000.
  • The number of vehicles registered in Canada is 34.3 million.

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