Car Loan Rates In Canada
Before you start searching for rates, it’s a good idea to have a general range of rates you can work with. Once you know your range and limits it will make searching so much easier. In Canada, the latest car loan rates range from 0% up to 36% with 0% usually only applying to new cars. With used cars, the APR is approximately 5%.
Understand How Rates Differ From Lender To Lender
Keep in mind, where you decide to get your financing from will have an impact on the rates you will pay for your car loan.
There are several options you should look into before deciding on the best car loan rates for you:
- Credit Union Loans
- Online Auto Lenders
- Bank Loans
- Dealership Loans
Banks are probably the most popular options for people looking to finance a car and have a good credit score. If you have a good credit score and a good history with a bank, you might be eligible for 0% financing through your bank.
Your Credit Union is another good choice for getting a reasonable rate on your car loan, especially if you are new to Canada. There are several lenders that offer special car financing options that are available to people who are new to the country but do have a credit history in Canada.
If you have a good credit history, you might be able to get 0% financing but if you have no credit or poor credit, you are probably looking at a car loan rate around 30% or higher.
The car loan rates you will pay through a dealership greatly depends on the dealer. If a dealership offers car loan rates outside of a bank or financing company, the rates can be much higher than you would probably pay with a car loan from your bank, credit union or even online.
This option is why it’s really important you understand who you are dealing with to get financing. There are financing companies that are quite different because they lend their own money. In-house financing can have fewer obstacles to get approved, better terms for repayment, and better car loan rates, even if you do not have a great credit score.
Banks, Credit Unions, and Online Financing companies can approve or deny your application based on only your credit score, [Name] has a unique approach. They look at your entire financial situation, including your credit score and income, before deciding if you qualify for a loan and will make sure you get the best car loan rates available.
Why Car Loan Rates Matter When Purchasing A Car
Your interest rate is very important whether you are buying a new or used car. The rate you are offered will determine how much you will be paying on the loan over a long period of time. Even if your rate has a small difference from other rates, it can still make a difference in what you pay. Let’s say you are looking to finance a $25,000 car loan to pay off over 5 years, your interest rate will be 6.5%. Your monthly payment will be $489 and the interest you will payout will come out to $4,346 over the length of the loan.
On the other hand, you have a 5.5% interest rate, it will drop your monthly payment to $478, reducing the interest to $3,652 by the end of the loan. You have just saved $700 in interest with an interest rate that is just slightly 1% lower.
The bottom line, the lower your rate means the lower your monthly payment will be. It can be very helpful if you want to keep your payments within a range that will work with your budget.
What Influences Your Loan Rates
Here is a list of things that lenders look at when determining an interest rate:
- Your credit history and credit score
- Your income
- Your employment history.
- The age of the vehicle
- Vehicle value
- The length of the loan
- The amount of your down payment
Car loan rates in Canada are influenced by The Bank of Canada’s interest rate policy. If interest rates are on the rise, you will probably pay a higher car loan interest rate. On the other hand, if rates drop, your car loan interest rate should drop as well. 822
How You Can Improve Your Chances For The Best Car Loan Interest Rates
There are several things you can do to improve your chances of getting a great interest rate:
Improve Your Credit Score
If your credit score or history is poor, you can actually turn it around. Make sure you pay your bills on time, keep your balance on your credit cards down to a minimal, and do not apply for any new credit at this time.
Increase The Amount For Your Down Payment
If you can possibly put down more money for your down payment, you will have a smaller loan which might help you get a lower interest on your car loan.
Sit Down & Work It Out With Your Lender
If your credit is far from great or you are new to the workplace so your employment history is not great, you should sit down with your lender so they understand your situation. At [Name], poor credit is not an obstacle to get financed. They will work with borrowers for every kind of credit background and look at more than just your credit score to get you approved.