Auto loan rates explained

Understand what affects your car loan rate and how to get a better deal. Credit tiers, terms and practical tips for stronger financing.

Auto loan rates in Canada are not one number. What you are offered depends on your credit tier, the lender, the vehicle and the structure of the deal. This page explains the inputs so you can judge an offer for yourself.

Credit tiers

Lenders group applicants into broad tiers. Prime borrowers with strong scores and clean history get the lowest advertised rates. Near prime sits in the middle. Subprime and deep subprime carry materially higher rates because the lender is pricing a higher probability of default. Moving up one tier usually saves more money than negotiating within a tier.

What moves your rate

• Credit score and history. Recent missed payments hurt more than old ones.
• Term length. Longer terms often carry higher rates as well as more total interest.
• Down payment. More money down lowers the lender's exposure.
• Vehicle age and mileage. Older, higher mileage vehicles attract higher rates.
• Loan to value. Financing more than the vehicle is worth pushes the rate up.

Rate is not the whole cost

Compare the total cost of borrowing, not just the monthly payment. A lower payment stretched over 84 months can cost thousands more than a higher payment over 60. Ask for the total interest figure on every offer you receive.

How to get a better rate

Pay down revolving balances before applying, avoid opening new credit in the months beforehand, save a larger down payment, choose a shorter term you can comfortably carry, and consider refinancing after a year of clean payments on a subprime loan.

Estimate the numbers with the auto loan calculator, or apply to see what you actually qualify for.