The best car loans in Canada for 2026

_{* Rates shown are starting rates. Your actual rate will depend on your business financials, credit profile, and loan amount. Always confirm current rates directly with the lender.}

What are current car loan rates in Canada?

Current car loan rates in Canada vary depending on the lender, your credit profile, the vehicle you're financing and the length of your loan. Borrowers with good credit can often qualify for rates starting around 7.20% from major banks, while online lenders and car loan companies may offer rates ranging from 6.99% to 35.00%, depending on the borrower's financial situation. Comparing offers from multiple lenders is one of the best ways to find a competitive car loan rate and reduce your total borrowing costs.

How a car loan works

A car loan lets you borrow money to purchase a new or used vehicle and repay it over time through regular monthly, biweekly or weekly payments. Most car loans in Canada are secured loans, meaning the vehicle acts as collateral for the lender.

Once your loan is approved, the lender pays the dealership or seller on your behalf. You then repay the lender over an agreed loan term, with each payment covering both principal and interest. Once the loan has been repaid in full, you own the vehicle outright.

Because the vehicle secures the loan, lenders can repossess it if you stop making your payments. This reduced risk is one reason car loans generally offer lower interest rates than unsecured personal loans.

Before applying for a car loan, it’s important to settle on your budget. You should have an idea of the maximum monthly payment you can afford, as well as the maximum amount you’re willing to spend in total over the life of the loan. Use our car loan calculator to help you work out your budget. 

Also read: What is the total cost of ownership for a car?

Most commonly, you will apply for a loan at the time you purchase your car, but you may want to apply for a car loan before you go car shopping — not only will this help you stick to your budget, it’ll also serve as a bargaining tool for better interest rates when you’re visiting dealerships You can apply for a car loan by visiting your local bank branch, or by going online.

After applying for a car loan from various lenders, you may receive one or more loan offers. Compare the offers to determine which loan is best for your needs. Be wary of how many hard credit checks you receive when applying for a car loan, as this can decrease your credit score. It’s always a good idea to ask your lender if they’re going to conduct a soft or hard credit check.

Once you have an agreement to purchase a car, you can submit it to your lender to get final approval over the loan. You will need to have a bill of sale and proof of car insurance in place before the loan will be paid out.

Also read: How to buy a car in Canada

After you’ve purchased your car, you’ll need to make regular payments to repay your loan. Most car loans in Canada require you to make a payment on a weekly, biweekly or monthly basis.

Shopping for a car loan can be extra tricky because the interest rates and terms you’re offered will vary depending on multiple factors. In addition to the usual loan eligibility factors like your age and credit score, lenders will also evaluate the:

When comparing car loans for the vehicle you’re planning to purchase, take these factors into account:

Down payment and loan amount

Some lenders may require a higher down payment on a vehicle than others. Look for the total loan amount that works best for your situation, and know that borrowing less money is almost always the better financial option.

APR interest rate

Short for Annual Percentage Rate, this interest rate defines your cost of borrowing, expressed as an annual percentage. The lower the interest rate, the better.

Loan term

While longer loan terms reduce your monthly payment, they usually increase your total interest costs. For example, financing a $35,000 vehicle over 96 months may lower your monthly payment compared to a 60-month loan, but you'll generally pay thousands more in interest before the loan is repaid.

Prepayment fees and penalties

Most car loans in Canada are open loans. This means that you can pay it off early with no penalty. However, some car loans in Canada are closed loans – which means that your monthly payments and terms are fixed, and you may incur penalties or fees for repaying part or all of your loan early. Look for an open car loan that can be repaid at any time.

Total cost of borrowing

Don't compare car loans based on the monthly payment alone. Every auto financing offer should clearly outline the total cost of borrowing, including the interest you'll pay over the life of the loan and any applicable fees. Comparing the total borrowing cost, not just the interest rate or monthly payment, can help you identify the best car loan for you.

Glossary breakdown

Here are some common terms you’ll come across in a car loan offer:

How to apply for a car loan

To apply for a car loan, visit your local dealership or bank and ask about the process. You can also apply online for a car loan. 

When applying for a car loan, you may be asked to provide one or more of these documents:

• Photo ID
• Proof of income, such as a recent pay stub or T4
• Proof of employment, such as an employment letter
• Vehicle information, including the VIN number
• Proof of insurance

How to get the lowest car loan rate

The interest rate you're offered depends on both your financial profile and the lender you choose. These strategies can help you qualify for a lower rate:

• Check your credit score before applying. Borrowers with stronger credit generally qualify for lower interest rates.
• Compare multiple lenders. Rates can vary significantly between banks, dealerships and online lenders.
• Get pre-approved before shopping. A pre-approval gives you a benchmark rate and strengthens your negotiating position.
• Consider a larger down payment. Borrowing less reduces lender risk and may improve your financing terms.
• Choose the shortest loan term you can comfortably afford. While monthly payments are higher, you'll typically pay less interest overall.
• Negotiate your financing. Interest rates aren't always fixed, particularly at dealerships where multiple lenders may compete for your business.

Can you use a personal loan for a car loan?

While you can use a personal loan to buy a car in Canada, it’s not recommended. Car loans typically have better terms and interest rates than personal loans because they’re secured by the vehicle itself. In other words, a bank or other lender can repossess your vehicle and sell it to recoup their money if you fail to make your loan payments. Personal loans, however, are unsecured and therefore tend to have shorter repayment terms and lower maximum borrowing amounts; they are generally better suited for purposes like debt consolidation, rather than financing a depreciating asset such as a vehicle.

Where can I get a car loan in Canada?

Car loans in Canada are easy to come by, and can be found in a number of places:

From the dealership

One of the ways you can get a car loan in Canada is to apply at the dealership where you purchase the car. The dealership will usually take care of the paperwork for you; however, in many cases, you aren’t presented with all the options for a car loan. Dealers will often present the loan with the highest interest rates or one that gives them a commission from the lender. You may also be encouraged to take a bigger loan than you need so that the dealership can earn a larger commission.

From a bank or credit union

Many Canadian banks and credit unions will allow you to apply for a car loan and be pre-approved before purchasing a car. Your pre-approval letter will state the maximum amount you can borrow, the interest rate you’ll pay, and the repayment terms. Final approval of the loan will likely be subject to the bank’s approval of the vehicle you buy. The approval process from banks will typically require a higher credit score and can be more time-consuming; however, interest rates tend to be lower. Because banks have no middle man, there is no mark up for interest that you usually see at dealerships.The top banks for car loans in Canada are BMO Bank of Montreal, CIBC, RBC Royal Bank, Scotiabank and TD Bank.

From a car loan company

Outside of banks and dealerships, there are several companies operating in Canada that specialize in car loans. They tend to have higher interest rates and stricter repayment terms than the big banks, but may be more forgiving if you have fair or poor credit. Examples of car loan companies include Canada Drives, Car Deal Canada, Auto Credit Express and Cafinco.

Bank vs. dealership financing: Which is better?

Whether it's better to get a car loan from a bank or a dealership depends on your financial situation and the type of vehicle you're buying. Banks often offer lower interest rates to borrowers with strong credit, while dealerships may provide greater convenience and access to manufacturer financing offers on select new vehicles.

Getting pre-approved through a bank or credit union before shopping gives you a clear borrowing limit, interest rate and monthly payment before you step onto the dealership lot. Because you already know what financing you qualify for, you'll be in a stronger position to negotiate both the price of the vehicle and the dealer's financing offer. Banks also lend directly to you, so there isn't a dealership involved that may earn a commission on the loan.

Dealership financing can be a good option if you're purchasing a new vehicle that qualifies for a promotional interest rate, such as 0% financing or another manufacturer-backed offer. Dealers also work with multiple lenders, which can make it easier to compare financing options in one place, especially if you have fair or bad credit. However, not every lender available to you will necessarily be included, and some financing offers may carry higher interest rates than you could qualify for elsewhere.

The best approach is to get pre-approved through a bank or credit union before visiting the dealership. You can then compare your pre-approved rate with the dealer's financing offer and choose the option with the lowest total cost of borrowing.

What are the limits on used car loans?

When buying a used car, you may find that there are some limiting factors:

• Vehicle age. Lenders often place limits on the age of the vehicle they will finance. For example, CIBC will extend financing to vehicles up to 10 years old.
• Loan term. While loans for new cars can stretch up to 96 months, used car loans typically come with shorter terms. A general rule of thumb is that most cars cannot be financed beyond their 10th year. For example, you may only be able to get a 2-year loan to buy an 8-year-old car.
• Maximum loan amount. Lenders may set limits on the amount they’ll lend you to buy a used car. For example, TD Bank limits loans to a maximum of $50,000 for vehicles more than 5 years old.

Read more: Should I buy a new or used car?