What Are Car Loan Interest Rates in Canada?

Posted : December 6, 2023
average car loan interest rate in Canada

A car loan is one of the easier loans to be obtained as there is an asset attached to it. It is a secured loan; therefore, getting approved for a car loan with favorable interest rates is possible as long as you know its eligibility requirements and also do thorough research.

Purchasing a car or any vehicle can be expensive if you are buying on monthly payments. New vehicles tend to have low interest rates and the used vehicles may have higher interest rates and 7.21% is the average car loan interest rate in Canada.

The average interest rates depend on the type of vehicle you wish to purchase and your financial background. Average car loan interest rate by credit score is an important factor to consider when applying for a car loan because lenders take into consideration your credit score while determining the rate of interest.

Another factor that affects the interest rate is whether the vehicle is new or used. If you have a lower credit score, you can still manage to get a decent interest rate on a car loan. There are auto loans that can help you build your credit score and eventually decrease your interest rates by replacing it with a new loan.

You can sometimes get interest at 5% to 6% and if you purchase the latest vehicle, it can go down around 3%. It should be noted that rates vary from lender to lender. Over and above, applicant’s income and employment status is also a key factor.

How Do You Get A Better Rate For A Car Loan in Canada?

  1. It is important to improve your credit score before applying for a car loan; this means that you must be responsible for your debts and other financial dealings right from the beginning.
  2. Consider waiting for a long time before purchasing a car to save money for a sizeable down payment. If you get a chance to increase the down payment, this route may get you a better rate of interest.
  3. If you have a low credit score and cannot afford to make a decent down payment on a car loan, you must look for an alternative solution. Get a co-signer to approve your loan if you have a poor credit score. This can strengthen your application and increase your chances for a more favorable rate of interest.
  4. You should consider pre-approval for a loan. It can be helpful and give you an opportunity to compare rates with loans and allow you to negotiate with dealerships.
  5. If you have a strong credit score, a good and stable source of income, and a positive debt repayment history, you should not be afraid to negotiate and make sure to get the best average interest rates.

 Purchasing a car with guaranteed car loan approval with bad credit could be possible. There are some lenders in Canada who offer such loans along with pre-approved loans and offers. All you need to do is connect with JourneyApproved’s auto finance experts to get started.

Jack Fortin
Auto Finance Expert

Jack Fortin is one the leading car loan and auto finance experts in British Columbia, Canada. He loves to write and share car loan news and updates.

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