Auto loan rates in Canada have risen significantly since 2022. In 2025, most borrowers are seeing rates between 6–12% depending on credit score, lender type, and whether the vehicle is new or used. Here's how to navigate the market and secure the best deal.
| Lender Type | New Car Rate | Used Car Rate |
|---|---|---|
| Big 5 Banks (RBC, TD, BMO, Scotiabank, CIBC) | 6.5–9.5% | 8–12% |
| Credit Unions | 5.5–8.5% | 7–10.5% |
| Dealer/Manufacturer Financing | 0–9.9% (varies) | 7–14% |
| Online Lenders (CarsFast, iA Auto) | 6–11% | 8–15% |
| Bad Credit Lenders | 14–29.99% | 14–29.99% |
Note: Rates depend heavily on your credit score, income, loan term, and vehicle age/mileage. The rates above are indicative ranges for 2025.
Car loans in Canada are typically offered in terms from 24 to 96 months. The most common terms are 60, 72, and 84 months. Longer terms mean lower monthly payments but significantly more interest paid overall.
| Loan Term | Monthly Payment* | Total Interest Paid* |
|---|---|---|
| 48 months (4 years) | $891 | $3,768 |
| 60 months (5 years) | $739 | $4,340 |
| 72 months (6 years) | $638 | $5,736 |
| 84 months (7 years) | $566 | $7,544 |
*Based on $38,000 financed at 7.5%. For illustration only.
Lenders generally offer lower rates on new vehicles because they hold their value more predictably, reducing lender risk. For used cars, lenders also factor in the vehicle's age — most lenders won't finance vehicles over 10 years old or with more than 150,000–200,000 km.
Your interest rate is determined by several factors lenders evaluate when you apply:
This is one of the most important decisions when financing a vehicle. Here's the key insight: always get bank pre-approval before visiting a dealership.
Dealer financing isn't inherently bad — dealers sometimes have access to manufacturer subsidized rates (e.g., 1.99% for 36 months on a new Civic). But dealers also earn profit by marking up the rate your bank approved them for. If your bank approved you at 7%, the dealer might offer you 9% and keep the 2% spread.
With a bank pre-approval in hand, you can compare the dealer's offer directly and choose whichever is lower. You also walk in with negotiating confidence.
If you have the cash, paying outright is almost always the best financial move — you avoid all interest charges. However, if the dealer is offering 0% promotional financing, it may make more sense to take the loan and keep your cash invested (especially in a TFSA or RRSP earning 4–6%).
At current rates of 7%+, paying cash is almost certainly better than financing, assuming the cash isn't earmarked for an emergency fund or investments with higher returns.
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Get KOHO Free — Use Code 45ET55JSYALast updated: March 2025. Rates are indicative ranges and will vary by lender, applicant, and vehicle. Always confirm current rates directly with lenders.