Vehicle financing is a competitive market – which is a plus for prospective car buyers. Rated right after purchasing a home in terms of lifetime importance, an automobile is more than just a convenient way of getting around. It’s a major investment, with car loans deserving as much attention as mortgages.

Where to Look for Auto Financing in Canada

Although most lenders use the same criteria to define your desirability as a borrower (and thus the interest rates they offer you), they often weigh them differently. Traditional financial institutions (like banks) tend to be more conservative, preferring customers with higher credit scores. In contrast, credit unions often offer car loans at lower interest rates, particularly to their account-holders.

Meanwhile, Canadian dealerships are eager to turn over their inventories. Many of them provide in-house loan facilities with less stringent conditions and longer terms of up to 96 months. Finally, online auto financing agencies are the most flexible of all in terms of low credit scores – but watch out for higher interest rates and fees that ramp up the final cost of your ride.

Shopping around and comparing all these sources takes time and effort. But the rewards are high, as differences in loan conditions can save you thousands of dollars over the next few years.

How to Find the Cheapest Car Loans in Canada

Here are five simple steps for finding the best-value financing for your new wheels:

  1. Look at your monthly budget and work out how much you can spend each month on a car, not just the repayments, but also insurance, road tax, parking, maintenance, and fuel. Ideally, this should be under 15% of your monthly income.
  2. Decide exactly what you need (not what you want!) in a car. Easy to park with low fuel consumption? Loads of space and a rugged frame for carrying work equipment?
  3. See what’s on the market in your price range, and decide what features would be nice (like a newer model with a sunroof), and what’s non-negotiable (high safety ratings and plenty of legroom).
  4. Know exactly how much you want to spend on your wheels each month, have a down payment ready (saving hard for a few months, if necessary), and the shortest auto loan term that you can squeeze into your monthly budget.
  5. Don’t be too ambitious – it’s more prudent to pick a small or older model for now, setting aside a generous margin to cover emergencies (like illness or unemployment).
  6. Check your credit report and pump up your credit score as high as possible before you apply for vehicle financing. This includes settling unpaid debts, consolidating amounts owed into a single debt, and not missing any future payments. This might take some sacrifices, but the payback comes in the form of a lower interest rate on your car loan – which is money in your pocket!
  7. Apply to prequalify with a couple of financial institutions, keeping a sharp eye on aspects like add-on fees, down payments, interest rates, penalties, and loan terms (shorter is generally better, as you pay less interest).


Stay well within your budget when buying your next car, with a generous margin that ensures you stay up-to-date on repayments, despite any unexpected expenses. In Canada, cheap car loans (which basically mean low interest rates) start with good credit scores. This indicates your ability to pay back a loan within the agreed term – which can save you thousands of dollars over the years ahead!

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