The best car loans in Canada for 2025
Jordan Lavin, Personal Finance Contributor
February 20, 2025 | Fact checked by: Natasha Macmillan, Business Unit Director - Everyday Banking
Finding the perfect car is exciting — but choosing the right financing can make all the difference.
In Canada, car loans offer flexible options for both new and used vehicles, with terms tailored to fit your budget and lifestyle. Whether you're buying from a dealership or a private seller, lenders provide competitive interest rates, repayment periods of up to 96 months, and financing solutions for all credit profiles.
It’s important to consider whether getting a car loan from a bank or a dealership is better for you, as well as understand how “rate shopping” and hard credit checks could impact you.
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Compare car loan providers in Canada
| Lender | APR | Loan amount | Loan term |
|---|---|---|---|
| CIBC | From 7.20% | $7,500 minimum | 12 to 96 months |
| TD Bank | From 7.20% | Varies | Up to 96 months |
| RBC Royal Bank | From 7.20% | Up to $75,000 | Up to 96 months |
| BMO Bank of Montreal | From 7.20% | Not specified | Not specified |
| Scotiabank | From 7.20% | Not specified | Up to 96 months |
| National Bank | From 7.20% | Not specified | Up to 96 months |
| Approval Genie | 3.90%–29.90% | Varies | 12 to 96 months |
| CarsFast | 3.90%–29.90% | $500 to $75,000 | 12 to 96 months |
| Clutch | From 8.99% | Varies | 24 to 96 months |
| Dealerhop | 6.99%–29.99% | Varies | 12 to 96 months |
| LoanConnect | 8.99%–35.00% | Varies | 72 to 84 months |
| Loans Canada | Up to 35.00% | Not specified | 12 to 96 months |
| CarDoor | Not specified | Varies | 12 to 96 months |
How a car loan works
Car loans work by allowing you to borrow money to buy a car, which you then repay over time with interest. Here are some recommended steps to take to prepare for, and take out, a car loan.
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.
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.
Compare loan offers
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.
How to compare car loans
Shopping for a car loan can be extra tricky because the 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:
Vehicle age
New cars usually have lower interest rates than used cars, since they depreciate more slowly and pose a lower risk to lenders.
Vehicle make and model
Some lenders have different car loan rates depending on the vehicle’s resale value or even its likelihood of theft.
Home ownership / relationship status
Like your income, these reflect your financial stability. Homeowners and/or those in stable relationships are seen as less likely to default.
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
The term defines how long you’ll take to repay the loan. Longer terms translate to lower monthly payments, but higher overall cost of borrowing.
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
Every loan offer you receive should outline the total cost of borrowing, including any fees.
Glossary breakdown
Here are some common terms you’ll come across in a car loan offer:
| Term | Definition |
| Price of vehicle | The full price of the vehicle including dealer fees and provincial sales taxes. |
| Interest | The annual interest rate (APR) for the loan. |
| Down Payment | The amount of money you pay for the vehicle up front. |
| Trade Value | The value of the vehicle you’re trading in, if applicable. |
| Rebates & Incentives | Any rebates or incentives from the dealership or manufacturer that reduce the loan amount. |
| Origination Fee | The fee charged by the lender for processing the loan. |
| Additional Costs | Other costs that may or may not be included in the loan amount, such as vehicle registration fees. |
| Amount Financed | The total amount being borrowed after considering the vehicle price, down payment, trade in value, and any rebates or additional costs. |
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
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.
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.
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?
Frequently asked questions
Where can I get a car loan with bad credit?
Many small used car dealerships will arrange financing for you even if you have bad credit. Typically, these loans require a high down payment, offer shorter repayment terms of one to two years, and charge higher interest rates than you would get from a major lender.
Will shopping for a car loan impact my credit score?
Generally speaking, applying for a number of car loans will have a modest impact on your credit score. This impact comes from a hard credit check. While shopping around, especially at dealerships, you may be subject to multiple credit checks as your car loan application is submitted to different lenders so that the dealership can offer you various financing options. The credit bureaus recognize when you’re shopping around, and will limit the impact of your applications on your credit report.
What credit score is needed for a car loan?
Many businesses specialize in car loans for people with bad credit, and as long as you’re willing to abide by the terms of the loan, you’re likely to be able to get a car loan no matter what your credit situation. For the best car loan interest rates and terms, you’ll need at least a “good” credit score of 640, and preferably higher than 680.
Which banks have the best car loan rates?
The best car loan rates in Canada are typically offered by the major banks - BMO Bank of Montreal, CIBC, RBC Royal Bank, Scotiabank and TD Bank.