Car Loans in Canada (2026): New & Used Auto Financing for Every Credit Type

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✍️ Written & fact-checked by the LoanWave Editorial Team · Last reviewed October 8, 2026 · Sources: Bank of Canada, FCAC, OSB, Equifax Canada

Buying a car is the second-biggest purchase most Canadians make, and the loan you choose matters almost as much as the vehicle. A difference of a few percentage points on a $30,000 loan can add up to thousands of dollars over the term. This guide walks you through how car loans work in Canada, what affects your rate and how to get matched with auto lenders for free.

What the latest data says

Car loans are getting bigger. According to Equifax Canada’s Q2 2026 credit trends report, the average new auto loan reached $36,979, up from $34,713 a year earlier, while total auto loan balances hit $179.1 billion. New auto loan originations fell 9.2% year over year, which suggests many buyers are holding off or shopping harder for financing — another reason to compare offers before you commit.

How car loans work in Canada

A car loan is a secured instalment loan. The vehicle itself is the collateral, which is why auto loans usually carry lower rates than unsecured personal loans. You make fixed payments (weekly, bi-weekly or monthly) over a set term. Once the loan is paid off, the lender’s lien is removed and you own the car outright.

You can get car financing from:

• Dealerships — they arrange financing through banks, captive lenders (the manufacturer’s finance arm) and sub-prime lenders.
• Banks and credit unions — often the best rates for strong credit.
• Online auto lenders — fast pre-approval and options for fair and bad credit.

New vs used car loans

What affects your car loan rate?

1. Credit score — the biggest single factor.
2. Down payment — more money down means less risk for the lender.
3. Loan term — longer terms often carry higher rates.
4. Vehicle age and mileage — older cars are riskier to finance.
5. Income and debt — lenders check your total debt service ratio.

Car loans for bad credit and no credit

If you have a low score, a past consumer proposal or bankruptcy, or no Canadian credit history at all, you can still get approved. Sub-prime lenders specialize in these situations. See our full guides to bad credit car loans in Canada and car loans for newcomers.

How much car can you afford?

A common rule of thumb is to keep your total car costs — payment, insurance, fuel and maintenance — under 15–20% of your take-home pay. Use our step-by-step guide on how much car you can afford in Canada before you shop.

Tips to get the best car loan

• Get pre-approved before visiting the dealer. You’ll know your budget and can negotiate on price, not payment.
• Compare the total cost, not just the monthly payment. Dealers can lower a payment by stretching the term.
• Watch for add-ons like extended warranties and protection packages rolled into the loan.
• Avoid negative equity. Rolling an old loan into a new one makes you owe more than the car is worth.
• Refinance later if your credit improves — see how to refinance a car loan in Canada.

How LoanWave helps

LoanWave is not a dealer or a lender. We help you compare auto financing options for free. Answer a few questions, see lenders and dealers you may qualify with, then apply directly with the one you choose. Checking your options won’t cost you anything.

Sources & methodology

This guide was researched and fact-checked by the LoanWave editorial team against Canadian government sources, federal law and national credit bureau data. Figures are the latest published at the time of review; lender rates and terms change often, so always confirm the final cost in your loan agreement. Example calculations use standard amortization formulas and are for illustration only. LoanWave earns referral commissions, but partners do not review or approve our editorial content.

1. Wealth Professional — Canada's consumer debt hits $2.68 trillion in Q2 2026 (Equifax data)
2. Equifax Canada — Q2 2026 Market Pulse consumer credit trends
3. Financial Consumer Agency of Canada — Credit reports and scores
4. Cassels — Changes to Canada's criminal rate of interest (35% APR, Jan 1, 2025)

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