Car Loans in Canada

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Is buying a vehicle on your to-do list? If you can’t afford an upfront payment, you may need to consider a car loan.

Questions like: “What is the average car loan interest rate?” “Where can I get the best loan rates?” need to be answered before choosing an auto-financing option. 

In Canada, the main lenders are popular banks such as RBC, TD, Scotiabank, BMO, and CIBC along with major car brands like Toyota and BMW.

Let’s review the major car loans options in Canada and their prime or interest rates.

Bank of Montreal (BMO) Auto Loan Options 

While BMO doesn’t have specific auto loans, its flexible personal loans can be used for car purchases and are best suited to customers with good credit scores.

Pros of getting a BMO Auto Loan

If you take out a personal (auto) loan with BMO, expect to enjoy the following benefits:

  • Excellent Interest Rates: The best interest rates are available to borrowers who secure their loans with personal assets. BMO car loan rates are determined by the BMO prime rate which is currently set at 2.45%
  • Flexible Payment Schedule: You can choose to pay off your car loan at once or make monthly payments
  • Ease of Access: Their 900 branches located all over Canada along with convenient online services makes it easy to access BMO loans

Cons of getting a BMO Auto Loan

  • Exact Interest Rates Cannot be Found Online: You’d need to apply with BMO, visit the local dealership, or call the bank directly to know your exact fixed or variable interest rate
  • You Need a Good Debt-Income Ratio: As with most other big banks in Canada, your debt-to-income ratio is important for determining the terms of your loan

TD Bank (TD Canada Trust)  Auto Loan Options

Toronto Dominion (TD) Bank’s auto finance options can help you buy different vehicle types such as cars, trucks, SUVs, RVs, and boats. Loans are also available for used cars that are less than seven years old. Buyers who need upfront car financing of $7500 to $50,000 can apply, but the amount you’re qualified to borrow will depend on factors like your down payment, repayment schedule, interest rate option, and income. 

Pros of getting a TD Bank Auto Loan

  • Upfront Financing: TD car loans provide upfront auto financing at 4,500 dealerships in Canada with both fixed and variable interest rates
  • Flexible Repayment Schedule: TD auto finance provides you with an amortization period of up to 96 months, regardless of which interest rate option (fixed/variable) you choose. Lump-sum payments can be made without any penalties. Loans can be paid off weekly, bi-weekly, semi-monthly, or in monthly installments. Payment extensions are available upon request if you qualify
  • TD Wheels App: you can visit a dealership from the comfort of your phone or make estimates of your payment using TD Bank’s special auto finance app.
  • High Loan Amounts: you can take out a loan valuing between $7,500 and $50,000 with competitive renewal rates for purchases of RVs, boats, cars, and trucks. Furthermore, bonus financing is available for services such as tire storage and gap insurance
  • High Customer Satisfaction: TD Bank bagged the 2018 and 2019 Power Award for Highest in Dealer Satisfaction

Cons of getting a TD Auto Loan

  • Interest Rate Undisclosed: Although TD Bank lists prime rates on its website, specific fixed or variable rates for car loans are not specified. Your interest rate will depend on the current TD prime rate (which is 2.45%), your income, and credit history. You can only get a personalized interest rate when you visit a dealership. However, you can use TD Bank’s auto loan calculator or WOWA’s loan calculator to check your payments

Eligibility Requirements

To apply, you must meet the following criteria:

  • Be a resident of Canada
  • Submit proof of income (e.g. employment letter), proof of insurance, and photo identification 
  • Note that TD bank runs credit scores to determine your credit-worthiness and TD Auto Finance reports monthly to TransUnion and Equifax

Scotiabank Auto Loan Options

You can get a car loan of up to $200,000 from Scotiabank, Canada’s third-largest bank. This loan can be spent on either a new vehicle or one that’s up to 7 years old.

Pros of getting a Scotiabank Auto Loan

  • Flexible Repayment Plan: Scotiabank provides you with an amortization period of up to 8 years (96 months) and you can choose to pay weekly, bi-weekly, or monthly. You can also pay off your entire loan at once without a penalty 
  • Flexible Financing Terms: as a permanent resident, down payment is at least 10% but foreign workers need to pay at least a 25% down payment. There is one payment break per year available
  • Ease of Access: You have easy access to up to 4,000 dealerships across Canada
  • Online Loan Management: Using your loan account number, you can find out how much is left on your loan, your next payment date, and can make an advance payment online
  • Apply Easily: You can apply using your proof of citizenship, proof of permanent residence, foreign worker status, proof of graduation within the next 90 days (for students), or employment letter (if you’re a recent graduate and starting a new job within the next 90 days)
  • Bonuses: You can receive cash back, 0% financing, and outstanding loyalty rebates
  • Start Right Auto Finance Program is available for newcomers for financing a new or used car that’s up to 4 years old. This can be accessed without a credit history with an amortization period of 5 years (60 months)

Cons of getting a ScotiaBank Auto Loan

  • Exact Interest Rates Cannot be Found Online: Interest rates aren’t published online, but we do know that they are based on Canadian prime rates
  • There had been several negative reviews on BBB

Eligibility Requirements

  • Although they are not listed online for ScotiaBank, you can find out the details when you apply at the bank or visit a local car dealership. It is likely that you might need to show proof of income, credit-worthiness, and proof of identification.

Royal Bank of Canada (RBC) Auto Loan Options

RBC also offers auto loan options and you can choose from fixed or variable interest rate financing options. It is offered under the personal loan fund.  

Pros of getting an RBC Auto Loan

  • Newcomer Automotive Loan Program: RBC has a Newcomer Automotive Loan Program for new immigrants into Canada within the last 3 years
  • Flexible Financing Terms: One payment break per year, no penalty for paying off loan at once, an amortization period of 8 years, can switch between fixed and variable rates at any time throughout the loan term
  • Fixed Rate Loan Benefits: you can choose to have the same interest rate throughout the loan term, regardless of changes in interest rates
  • Variable Rate Loan Benefits: loan term can either be prolonged or sped up depending on interest rate changes. Although the payment will remain the same, the loan term if prolonged if rates rise or sped up if rates fall

Cons of getting an RBC Auto Loan

  • Exact Interest Rates Cannot be Found Online: Interest rates aren’t listed online, but a loan Payment Calculator is available through RBC online banking for estimating the cost of loans and comparing loan terms along with interest rates
  • Skipped loan payments will accumulate interest

Eligibility Requirements

  • Be a Canadian resident and at least 18 years old 
  • Meet the income requirements
  • Meet the bank’s credit score requirements 
  • Provide your banking details (if you aren’t already an RBC customer)

Canadian Imperial Bank of Commerce (CIBC) Auto Loan Options

CIBC Auto Loan options include taking out a CIBC car loan to be paid off within 8 years, a CIBC Personal Loan to be paid off within 5 years, a CIBC Personal Line of Credit, or a CIBC Home Power Plan.

Pros of getting a CIBC Auto Loan

  • CIBC Car Loan: There is no down payment and you can pay off the loan in 8 years and without any penalty. Can skip up to 2 monthly payments, finance new or used vehicles, and can pay weekly/bi-weekly/semi-monthly/monthly. Online services are available. You can borrow a minimum of $5,000
  • CIBC Personal Loan: You can pay off the loan in 5 years with fixed amount payments. Payments can be made weekly, bi-weekly, or bi-monthly
  • CIBC Personal Line of Credit: This option gives you a pool of funds to draw from, interest is paid only on the amount used
  • CIBC Home Power Plan: You combine a line of credit and a mortgage (thus using your home equity) to aggregate all of your personal credit under this singular low-interest solution. You get a lower interest rate and a higher credit limit

Cons of getting a CIBC Auto Loan

  • Maximum loan amount is unspecified

 Eligibility Requirements

  • Be a Canadian resident and at least 18 years old
  • Minimum annual earnings of $17,000
  • Have not filed for bankruptcy in the last seven years
  • Have not been declined credit from CIBC in the last six months
  • Loan is to be used for car financing

Auto Loan Options at a Glance

Features BMO TD Bank Scotia Bank Royal Bank Canada CIBC
Prime Rate as of July 2020 2.45% 2.45% 2.45% 2.45% 2.45%
Car Loan Interest RateAvailable Online? No No No No No
Loan Limits Unspecified $7500- $50,000 Up to $200,000 Unspecified Minimum of $5,000
How many payment breaks per year? None None One One Two
Amortization Period Unspecified 8 years 8 years 8 years CIBC Car Loan:8 yearsCIBC Personal Loan: 5 years
Penalty on Paying Your Loan Off at Once? No No No No No
Auto Finance Programs for Newcomers Available? No No Yes Yes No

How to Get the Best Deals

Using the information provided above, you can get a car loan from any of the listed options and decide which one is best for you. Here are some tips on how to get the best deals:

  • Negotiate for the most competitive interest rates from banks based on specific details like your credit score, loan term, and loan amount
  • Negotiate with car dealerships, then compare prices with bank rates and terms
  • If dealership rates are comparable to bank rates, consider other elements of the loan such as newcomer auto finance programs and availability of payment breaks 
  • With a strong credit score, getting a bank loan is likely a better option as you may qualify for discounts or rebates
  • Keep in mind that if you work directly with a bank for a loan, you avoid the risk of changing interest rates
  • Choosing a car loan that’s perfect for you requires proper research and price comparison of the available car loans and equating them with your specific needs

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