How to Refinance a Car Loan in Canada (and When It’s Worth It)

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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

If your credit has improved since you bought your car — or you got stuck with a high dealer rate — refinancing could lower your interest rate and monthly payment.

📘 This article is part of our complete guide to car loans in canada.

What does refinancing a car loan mean?

You take out a new loan to pay off your existing car loan, ideally at a lower rate or with better terms. The new lender pays off the old lender and becomes the lienholder on your vehicle.

When refinancing makes sense

• Your credit score has improved significantly since you got the loan
• Your current rate is high because you had bad credit or accepted dealer financing quickly
• You need a lower payment due to a change in income
• You want to remove a co-signer from the loan

When it may not be worth it

• Your current loan has steep prepayment penalties
• You’re near the end of your term (most interest is already paid)
• You owe more than the car is worth (negative equity)
• Your car is too old or has very high mileage for lender rules

How to refinance, step by step

1. Check your current loan — balance, rate, remaining term and payout penalties.
2. Check your credit score to see how much it has improved.
3. Find your car’s value to make sure you have equity.
4. Compare refinancing offers — focus on APR and total cost.
5. Apply and sign — the new lender pays off the old one.

Watch out for term stretching

Lowering your payment by adding years to the loan can increase the total interest you pay. Compare the total remaining cost of your current loan with the new one.

LoanWave isn’t a lender. We help Canadians compare auto financing offers, including refinancing options, for free.

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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