Credit Score for a Car Loan in Canada

Buying a car is the second-largest purchase most Canadians make. Whether you're at a dealership or applying through your bank, your credit score directly determines whether you get approved and at what interest rate. This guide covers every tier from excellent to subprime.

Car Loan Credit Score Requirements in Canada

The True Cost of a Bad Credit Score on a Car Loan

On a $30,000 vehicle financed over 72 months, the difference between 5% and 20% APR is staggering:

• 5% APR: ~$480/month, ~$4,600 total interest
• 10% APR: ~$554/month, ~$9,900 total interest
• 20% APR: ~$712/month, ~$21,300 total interest

Improving your credit score from Fair to Good before buying a car can save you $100-$15,000 over the life of a typical auto loan.

Getting a Car Loan with Bad Credit in Canada

If your score is below 600, here are your realistic options:

• Subprime auto lenders: Companies like Canada Drives, Carloans411, or CarDoor specialize in bad-credit auto financing. Expect 15-25% APR.
• Dealership financing: Many dealerships work with multiple lenders and can sometimes get approvals for 550+ scores.
• Credit union: Some credit unions take a more holistic view of creditworthiness and may approve members with poor scores they know personally.
• Co-signer: Having a creditworthy co-signer brings you up to their tier for rate purposes.
• Larger down payment: 20-30% down reduces lender risk and can improve approval odds.

Should You Wait and Improve Your Score First?

If your need isn't urgent, waiting 6-12 months to improve your score can save you thousands. Even moving from 600 to 660 can cut your interest rate nearly in half on a typical auto loan. Use that waiting period to pay down credit card balances, keep all payments on time, and build credit with KOHO.