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Looking to buy a new car? The best car loan rates in Canada can save you a ton of money in interest fees and make your life a whole lot easier.

Purchasing a vehicle involves a lot of work and often ends up becoming a more expensive venture than you initially planned for.

One of the tasks you need to complete is to find the cheapest car loan possible if you are unable to pay 100% cash outright.

To do this, you can hop from bank to bank to compare their car loan rates (e.g. TD, Scotiabank, BMO, RBC, and TD). Alternatively, you can easily compare multiple auto financing rates from online lenders without leaving the comfort of your home.

Best Car Loan Rates in Canada for 2020

Here are lenders offering some of the lowest rates you will find on car loans in Canada – starting at 0%.

The maximum rates available below are high and typically only apply if you have a poor or bad credit rating. For the average Canadian with a good credit score, your best rate is way lower.

Loan Connect

  • Interest rate: 4.6% to 46.96%
  • Loan term: 1-5 years
  • Maximum loan amount: $50,000

Loan Connect offers a search engine to find personal loans online from various lenders online with rates as low as 4.6%.

Whether it is a personal loan (e.g. car loan), debt consolidation loan, bad credit loan, or emergency loan, Car Loans Canada can help you find the best rate regardless of your credit score.

The application form is short and you are matched with a suitable lender within minutes.

Loan Connect is accredited by the Better Business Bureau where it holds an A+ rating. For more details about Loan Connect, click here.

Visit Loan Connect.

Moves Financial Loan

  • Interest rate: 0% to 15.65% AIR
  • Loan term: 0-6 months
  • Maximum loan amount: $2,500

Moves Financial offers loan facilities to independent contractors and gig workers.

If you are looking for a personal loan or a loan to purchase an e-bike, Moves makes the process easy as your loan application is based on your income history and not a credit check.

You can borrow up to $2,500 and repay it using a 26-week repayment plan. Early repayments do not attract a penalty.

E-bike financing starts at 0% APR while personal loans have a 15.65% AIR.

Moves Financial loans are only available to residents of BC, Ontario and Alberta at this time.

To qualify for a loan, you must have received income from a gig platform in the last 90 days and have an active bank account.

Income from the following gig platforms are acceptable: Amazon Flex, TaskRabbit, Foodora, SkipTheDishes, Upwork, Uber, UberEats, Hyr, HiRide, FaceDrive, and Instacart.

Get a Moves Financial Personal Loan.

Get a Moves Financial E-Bike Loan.

Canada Drives

  • Interest rate: 0% to 30%
  • Maximum loan amount: $75,000
  • Loan term: 12-92 months

Canada Drives has been connecting Canadians with competitive car loan rates since 2010. With over 350 affiliated dealerships across the country and 1 million completed applications, you can have your car in as little as 48 hours.

To start the process, you will need to complete an online application form which takes 3 minutes or less.

After providing your basic details and submitting your application, Canada Drives finds a suitable deal and you know what’s available before setting out.

You can borrow up to $75,000 for 12-92 months and a loan rate ranging from 0% to 30%.

Read this Canada Drives review for more details.

Car Loans Canada

  • Interest rate: 0% to 29.95%
  • Loan term: Up to 8 years

Car Loans Canada is the oldest online auto service in Canada. With operations in nine provinces, they have served more than 1.6 million Canadians to date and approve over 11,900 applications every month.

Their online application form takes less than 3 minutes and approval for auto-financing is pretty quick.

Using Car Loans Canada to find the best car loan rates makes sense since they send out your application to 300+ lenders at the same time.

The loan interest rate ranges between 0% and 29.95% and you can borrow money for up to 8 years.

This Car Loans Canada review covers a few more details about their services.

Ferratum Loans

  • Interest rate: starting at 18.9%
  • Loan term: 1-5 years
  • Maximum loan amount: $15,000

Ferratum provides quick access to cash when you need it. Their fast approval loan service means you can receive funding in less than 24 hours and no documents are required.

The maximum amount you can borrow using Ferratum Canada is $15,000. Therefore, it only comes in handy if you are looking at buying a used vehicle.

Individuals who have a less than stellar credit rating can also apply for a loan as long as they have an employment income of at least $2,000 per month. They must also not have declared bankruptcy within the last 7 years.

Ferratum loans start at 18.9% and you can borrow funds for up to 5 years. Learn more in this detailed Ferratum review.

What is a Car Loan and How Does It Work?

A car loan is a personal loan that is used to purchase a vehicle – preowned or new. Over time, you will pay back the amount you borrowed from the lender, plus interest.

The car serves as collateral for the loan, and if you are unable to make payments on time, the lender can seize the vehicle.

You can get a car loan from a bank, dealership, online lender, or a credit union.

An online lender is convenient and you can easily compare rates without leaving your home. Online lenders like Canada Drives and Car Loans Canada have partnerships with dealerships which accelerates the process from applying for a loan to getting your new car.

The various terms you should understand when applying for a car loan include:

Principal: This is the amount you borrow to purchase a vehicle.

Interest rate: This refers to the effective interest rate (APR) you pay on your loan. The car loan rate you qualify for varies with your credit score, vehicle age, down payment, and the lender’s prime rate.

The interest rate can be fixed or variable. For most car loans, your monthly payments stay the same (i.e. fixed rate). When you make a payment, a portion goes to offset the principal amount owed and the remainder goes to interest.

Loan Term: This is the length of time you have to pay back the car loan. It can range from 1-8 years (12-96 months).

The combination of a lower interest rate and a shorter loan term can help you save money on your car loan. Use the car loan calculator below to test various scenarios.

Lease vs. Finance a Car?

When you can’t afford to pay cash upfront for a car, you can choose to either finance it through a loan or lease it.

Lease a Car

Leasing is like renting a car…you don’t own it. You drive the car for a specified length of time and only make payments during that time. When your lease ends, you can simply return the car and move on.

Leasing a car makes sense if you:

  • Don’t want to deal with repairs and maintenance. A lease is typically still covered by a manufacturer’s warranty
  • Always want to drive a new car every 2-3 years
  • Want lower monthly payments
  • Don’t want to take on a car loan
  • Don’t drive a lot – there are mileage limits
  • Want an option to buy a car later if your needs change

Cons of Leasing a Car

When you lease a car, your lease payments do not build up to become equity in the car and you do not own it.

Generally, there will be limits to how much driving you can do (mileage-wise), penalties are incurred if you terminate your lease early, and insurance costs more.

Finance a Vehicle

When you finance a car, you take out a car loan and make payments until your entire loan balance is paid off. After paying off your car loan, the car is yours and you can do whatever you want with it.

The benefits of financing a car purchase include:

  • You own the car after paying off the car loan and can sell it later or trade it in for another vehicle
  • You build equity in the vehicle with each monthly payment
  • There is no limit to the mileage you can drive
  • Car insurance costs are lower over the life of the car
  • There is the flexibility to customize the car to your taste

Cons of Financing (buying) a Car

Your monthly payments are going to be higher while you are paying off the loan compared to a lease. You are responsible for selling the car if you later decide to do so later.

Lastly, maintenance and repair costs are your responsibility.

Car Loan Application Checklist

You can expedite your car loan application by getting your finances in order and by being ready to provide any required documentation.

Proof of Employment: Most lenders want to see that you are employed and earning enough income to cover your car payments. Copies of your bank statements, pay stub, or notice of assessment should be adequate.  Some lenders also accept government assistance or benefits.

Credit Score and Report: Your 3-digit credit score is a measure of your creditworthiness. If you are not sure what your credit score is, you can check it for free here.

Your credit report also details how you have managed your finances over time. Typically, lenders want to see your debt-to-income ratio, payment history, and account balance. You can improve your credit score by paying bills on time.

Bank Details: You will need to show that you have a bank account in Canada. A void cheque to set up your monthly payment is typical.

Driver’s License and Proof of Residence: A government-issued ID such as your driver’s license is used to confirm your province of residence and address. Other documents that may be requested include your utility bills.

Vehicle Information: Duh! Of course, you need to know the type, make, and purchase price of the vehicle you want.

Proof of Car Insurance: Before driving off the lot, you may have to show you have purchased car insurance.

Car Loan Calculator

Final Thoughts

When you have found the best car loan rate, make sure to keep to your payment schedule (bi-weekly or monthly) as this will improve your credit score and help you avoid expensive late payment penalties.

Most car loans do not have prepayment penalties. So, if your income increases or you come by a cash windfall, you can increase your payments and lower your interest costs.

Related posts:

Have you recently taken out a car loan? Let us know about your experience in the comments.

Best Car Loans in Canada: Compare Cheapest Car Loan Rates


The best car loan rates in Canada can save you money on your car purchase. Find out how to compare auto loans and find the cheapest rates available. Should you lease or finance your car? Learn more in this review.