Car Deal Canada

Ontario Car Loans

Ontario Car Loans

Financing a car purchase in Ontario generally involves getting approval for an auto loan from a lender like a bank, credit union, or dealership. The lender will provide you with funds to pay the car’s selling price minus any down payment you put down. You’ll then repay the loan in monthly installments over a set repayment term along with interest.

 

To get approved for the best possible car loan, there are a few key factors lenders consider:

  • Your credit score – Lenders generally look for a minimum score of 650+ for approval. The higher your score, the better the rate you can qualify for.
  • Your down payment amount – A larger down payment reduces the risk for lenders.
  • Your income and debts – Proof of stable income and manageable debts help demonstrate your ability to repay.

 

In this comprehensive guide, we’ll discuss everything you need to know to get the best possible deal on financing a car purchase in Ontario, including:

  • Checking your credit score
  • Current average interest rates
  • Getting pre-approved
  • Tips for the lowest rate
  • Loan term considerations
  • And more…

 

Let’s get started!

Get Pre-Qualified in Under 60 Seconds

All Credit Approved and 0 Money Down Options Available

 

Check Your Credit Score

Lenders generally look for a credit score of 650 or higher when approving car loans in Ontario. However, you may still get approved with a score in the low 600s depending on the lender

The higher your credit score, the better interest rate you can qualify for. Borrowers with excellent credit (720+) will get the lowest rates, while those with poor credit will pay the highest interest rates.

Before applying for an auto loan, it’s a good idea to check your credit report from both Equifax and TransUnion. This will allow you to understand your current credit score and see details on your credit history. You can get free copies of your reports once per year from Equifax and TransUnion.

If your credit score needs improvement, some tips include paying bills on time, lowering credit utilization, and correcting any errors on your reports. Give yourself at least 3-6 months to improve your credit before applying for a car loan in order to get the best rates.

 

Current Ontario Car Loan Rates

The current average interest rate on new car loans in Ontario is around 5-7% for borrowers with good credit scores. For used cars, rates are generally 0.5-2% higher. Subprime borrowers with poor credit can expect to pay much higher interest rates from 10-25%.

Your actual interest rate will depend on multiple factors like your credit score, down payment amount, loan term length, and the lender. Borrowers with credit scores above 720 will qualify for prime rates starting around 3-5%, while those under 620 may only be approved for subprime loans above 15%.

Here are some examples of current rate ranges for Ontario car loans:

  • New car, Excellent credit (720+): 3.99%-5.99%
  • New car, Good credit (680-719): 5.99%-8.99%
  • New car, Fair credit (620-679): 8.99%-12.99%
  • Used car, Excellent credit: 4.99%-7.99%
  • Used car, Good credit: 6.99%-9.99%
  • Used car, Fair credit: 9.99%-14.99%
  • Subprime used car loan: 15%-25%

 

Checking your credit score ahead of time can give you an idea of what rate range you may qualify for. Improving your credit score and optimizing factors like your down payment can help you secure the most competitive interest rate.

 

Get Pre-Approved Before Visiting the Dealer

Getting a car loan pre-approval before you start shopping for a vehicle can give you a major advantage when it comes to negotiating the best rate. Pre-approvals allow you to know your credit score, interest rate, and maximum loan amount before ever stepping foot in a dealership. This puts you in a much stronger bargaining position.

A pre-approval is valid for 14 days, giving you plenty of time to find the right car while already knowing the terms of your financing.

You can get pre-approved for a car loan from several sources:

  • Your bank or credit union – Most major banks like TD, Scotiabank, and CIBC offer pre-approvals on auto loans.
  • Online lenders like Care Deal Canada – Quick and easy online applications for pre-approval.
  • Directly through a dealership – Many dealers will pre-approve you before negotiating price.

 

Going through a bank or online lender first means you can get pre-approved before even talking to a dealer. This allows you to negotiate purely on the purchase price of the vehicle, already knowing what rate you qualify for on your loan.

 

Tips for the Best Rate

There are a few key strategies you can use to try and get the lowest possible interest rate on your Ontario car loan:

First, shop around and get quotes from multiple lenders rather than just accepting the first rate you’re offered. Banks, credit unions, dealerships, and online lenders will all offer different rates based on their own formulas. Getting multiple quotes gives you leverage to secure the best deal. Shopping around with at least 3 lenders can save 0.5% to 1% off your rate.

Next, make the largest down payment you can comfortably afford. The higher your down payment, the lower the risk for the lender – so you’ll generally get a better interest rate. Putting 20% or more down is ideal, but any extra funds will help lower your rate.

You should also consider choosing a shorter loan term, like 3 years instead of 5 or 6. Shorter terms mean less interest paid over the life of the loan. Just keep in mind shorter terms come with higher monthly payments.

Finally, if you have poor credit, adding a creditworthy cosigner to your loan application can help you qualify for a lower rate. The cosigner’s good credit score balances out your score in the eyes of the lender. Just make sure the cosigner understands they are equally responsible for repaying the auto loan.

 

Loan Term Considerations

When financing a car purchase in Ontario, one of the most important decisions is choosing the length of your loan term. Loan terms are typically available from 12 months up to 96 months (8 years). The loan term length significantly impacts your monthly payments, total interest paid, and overall cost of the car loan.

Shorter loan terms like 24-36 months have lower monthly payments but require larger down payments. A shorter term saves money on interest since the loan is paid off quicker. However, not everyone can afford the larger monthly payments associated with short loan terms.

Longer terms like 72-96 months make the car more affordable each month by spreading payments out. However, you pay much more total interest over the life of the long-term loan. The average car loan term chosen in Ontario is 72 months.

Most experts recommend limiting your loan term to a maximum of 60 months. Loan terms over 60 months incur excessive interest charges and increase the risk of becoming underwater on your loan. However, longer terms may be necessary if you require lower monthly payments. Consider the shortest term you can comfortably afford when financing your car purchase.

 

Down Payment Options

While there’s no specific minimum down payment required by law in Ontario, most lenders prefer you put down at least 10-20% of the vehicle’s purchase price. With a larger down payment, you’ll generally qualify for a lower interest rate from lenders. This is because a bigger down payment reduces the lender’s risk – if you default on the loan, they have more equity to seize.

A 20% down payment can help you get the most favourable loan terms and interest rates. For a $30,000 vehicle purchase, that would equal a $6,000 down payment.

If you don’t have cash saved up, you may need to get creative with down payment sources. Borrowing from a retirement account, using earned income tax credits, or having a family member gift you money can help boost your down payment. However, a larger down payment does mean more money upfront.

 

Dealer Financing vs Bank

When it comes to financing a car purchase in Ontario, you have two main options – going through the dealership or getting a loan directly from a bank. There are pros and cons to each approach.

Dealership financing may offer lower interest rates or other incentives to encourage you to finance through them. Dealerships can offer rates as low as 0% for certain promotions. However, bank rates can also be very competitive, sometimes even lower than special promotional rates from dealers.

The loan approval experience may be faster and easier through a dealership versus a bank. Dealers are used to processing car loan applications quickly, while banks may take longer. However, banks can pre-approve you for an auto loan before you even visit the dealer, giving you added negotiating power.

Dealerships also have access to incentives from the manufacturer, like discounted interest rates on certain models. Banks do not have access to these special offers. However, banks may offer incentives like waived processing fees.

Overall, it’s recommended to check with both dealerships and banks/credit unions when shopping for a car loan. Getting multiple quotes allows you to compare all the options and make the most informed decision. Pre-approval from a bank also strengthens your position when negotiating with the dealer.

 

Co-Signing a Car Loan

Getting a co-signer on your auto loan application can help improve your chances of getting approved if you have little credit history or a low credit score. A co-signer agrees to be equally responsible for repaying the car loan if you are unable to make the payments.

Lenders typically prefer co-signers to have good or excellent credit (scores above 700), stable income, and a low debt-to-income ratio. Family members like parents often co-sign on loans for younger borrowers. The main risk for the co-signer is that they are liable for the remaining loan balance if you default.

Before getting a co-signer, try improving your own credit score and debt levels. If you still need the help, find someone willing and financially able to co-sign. Discuss the risks openly and have a plan for making payments so the co-signer doesn’t end up responsible.

 

Leasing vs Buying

When deciding how to finance a new car purchase in Ontario, two main options are leasing versus buying. There are pros and cons to each approach.

With a lease, you essentially rent the vehicle for a set period of time, usually between 2-4 years. At the end of the lease, you return the car to the dealer. You just pay for the depreciation that occurred during the lease term, which keeps monthly payments lower.

Some key pros of leasing include:

  • Lower monthly payments
  • Drive a newer car more often
  • Minimal upfront costs
  • Worry less about resale value

 

However, leasing also comes with some notable cons:

  • Never own the car
  • Mileage limits and wear restrictions
  • Extra fees at lease end for excess mileage or damage
  • Hard to get out of lease early

 

When you finance a car purchase, you own the vehicle at the end. This typically requires a higher down payment up front and higher monthly payments compared to leasing. But over time, building equity in the car as you pay it off can be advantageous.

Pros of buying include:

  • Build equity and own the asset
  • No mileage limits
  • Customize, modify or sell the car anytime
  • Potentially lower total cost long-term

 

Cons of buying a car on finance include:

  • Higher monthly car payments
  • Need to pay off loan to upgrade vehicles
  • Responsible for disposal when you’re done with car

 

When evaluating the total cost difference between leasing and buying, it depends on factors like the purchase price, down payment, interest rates, loan terms, lease terms, mileage, and more. Speaking with a financial advisor can help analyze your specific situation to determine if leasing or buying makes more financial sense for your needs.

 

New vs Used Car Loans

When it comes to financing, there are some key differences between new and used car loans in Ontario. New cars tend to have lower interest rates and longer loan terms available. New car loans typically have interest rates starting around 3-5%, while used car loans are higher at 5-8% on average.

New cars also give you the benefit of full manufacturer warranties and maintenance programs. With a new car, you won’t have to worry as much about surprise repair costs down the road.

However, used cars are substantially cheaper to purchase upfront. According to CarGurus, even a 2-3 year-old used car can be 20-40% less expensive than the same model brand new. The lower sticker price also means you may be able to get approved for a used car loan more easily if you have average credit.

Lenders sometimes offer longer terms up to 8 years for new cars, but average terms of 4-6 years for used vehicles. The longer term can lower your monthly payment on a new car, but may cost more in total interest.

When calculating the overall cost difference between new and used, consider the loan interest rate, loan term, projected maintenance costs, and how long you plan to keep the vehicle. New cars make more sense if you prioritize having the latest features and plan to own the car for many years after it’s paid off.

 

Refinancing a Car Loan

Refinancing your existing car loan is something to consider if you want to improve your rate, lower your monthly payments, or change your loan term. With refinancing, you take out a new loan to pay off your current auto loan. This can allow you to take advantage of better rates and terms.

You may want to refinance your car loan if you initially had a high-interest rate but have since improved your credit score. Rates are also lower now compared to recent years, so refinancing could allow you to save substantially on interest charges over the life of the loan. Generally, you’ll want to refinance if you can get at least 2 percentage points shaved off your rate.

The steps to refinance involve applying for a new car loan, then using those funds to pay off your existing loan. You will need to qualify based on your current credit score and other factors. Make sure to shop around and compare refinance offers from lenders like banks, credit unions, and online lenders. Your loan balance cannot exceed the car’s current value. There are usually no upfront fees to refinance.

Overall, refinancing your car loan at a lower rate can save you money each month and over the life of the loan. It’s worth exploring if your credit has improved or if current rates are substantially lower. Just be sure to compare all costs and terms first to ensure refinancing makes sense for your situation.

 

Alternatives to Traditional Loans

While most people take out a traditional car loan from a bank, dealership, or lender to finance their vehicle purchase, there are some other options you can consider. These alternatives may make sense in certain situations.

One alternative is a personal loan. These unsecured loans from your bank can provide funds that you can use towards a car purchase. Personal loans typically have lower interest rates than car loans and may be an option if you have good credit but don’t qualify for the best car loan rates for some reason.

Another option is a home equity line of credit (HELOC). If you have substantial equity built up in your home, you may be able to access those funds for a car purchase via a HELOC. The interest is usually tax-deductible as well. Just be cautious borrowing against your home equity.

Finally, some people choose to simply use cash to buy their vehicle outright rather than taking out any loan. This avoids interest payments but requires you to have the full vehicle price saved upfront. Buying an affordable used car with cash is often the least expensive option overall.

 

Summary

Getting the best car loan in Ontario requires doing your research upfront. Start by checking your credit score and addressing any issues, as this will impact the rates you qualify for. Shop around with multiple lenders and get pre-approved to strengthen your negotiating position. Aim for at least a 20% down payment if possible, and consider shorter loan terms to save on interest.

Optimize your loan by comparing rates across banks, dealerships, and brokers. Consider the pros and cons of leasing versus buying, and weigh used versus new vehicle loans. If needed, alternatives like co-signing or refinancing may help get better terms. Use online car payment calculators to estimate payments and educate yourself before visiting the dealer.

For further assistance, contact a financial advisor or see resources like the Financial Consumer Agency of Canada. With some preparation and diligence, you can secure the ideal auto financing loan for your needs and budget.

Questions About Car Loans in Ontario?

We offer car loans anywhere in Ontario but some of the main areas we service include.

Most lenders in Ontario require a minimum credit score between 650-700 for auto loan approval. However, you can get approved with scores as low as 600 depending on the lender. For the best rates, aim for a score of 720 or higher.

Lenders typically look for a down payment of at least 10-20% of the vehicle’s purchase price. The higher your down payment, the better rate you’ll qualify for. Putting 20% down or more is ideal to get approved and save on interest.

If you have bad credit, look for lenders that specialize in subprime lending, like Car Deal Canada. You will pay higher interest rates, so try adding a cosigner or putting more money down to offset your low credit score.

Leasing has lower monthly payments but you don’t own the car. Financing costs more each month but allows you to eventually own the vehicle. Compare total costs and ownership goals to decide which works best for you.

The lowest rates currently available are around 3-5% for borrowers with excellent credit scores above 720. Compare options across banks, dealerships, and online lenders to find the lowest rate you qualify for.

Getting the lowest rate requires a credit score over 720, at least 20% down payment, and a short loan term. Shopping around with multiple lenders and having a cosigner can also help you secure the most competitive interest rate.

The average used car loan rate in Ontario is 6-9% currently. Those with excellent credit can qualify for rates as low as 4-5%, while borrowers with poor credit will pay interest rates from 15-25% or higher.

Yes, some subprime lenders offer car loans for ODSP and OW recipients in Ontario. Interest rates are higher and loan amounts are lower. Proof of benefits and income is required for approval.

Most car loans in Ontario range from 2-8 years for the repayment term length. 4-6 years is typical for new cars, while used cars average loan terms of 2-5 years.

No, once you sign a car loan contract and drive the vehicle off the lot, you own the car. Voluntary repossession hurts your credit score. Make sure you can afford payments.

Yes, you must pay 8% provincial sales tax (PST) when financing a car purchase in Ontario. The PST is charged on the selling price less any trade-in allowance.

Making extra principal payments, refinancing at a lower rate, and paying bi-weekly instead of monthly can all help you pay off an auto loan faster and save on interest.

Students with no credit history should apply with a cosigner that has an established credit record. Banks and online lenders offer student auto loans to those with a creditworthy cosigner.

You must be at least 18 years old to apply for auto financing in your name in Ontario. Some lenders allow co-signers for borrowers as young as 16.

 

Check Your Credit Score

Lenders generally look for a credit score of 650 or higher when approving car loans in Ontario. However, you may still get approved with a score in the low 600s depending on the lender

The higher your credit score, the better interest rate you can qualify for. Borrowers with excellent credit (720+) will get the lowest rates, while those with poor credit will pay the highest interest rates.

Before applying for an auto loan, it’s a good idea to check your credit report from both Equifax and TransUnion. This will allow you to understand your current credit score and see details on your credit history. You can get free copies of your reports once per year from Equifax and TransUnion.

If your credit score needs improvement, some tips include paying bills on time, lowering credit utilization, and correcting any errors on your reports. Give yourself at least 3-6 months to improve your credit before applying for a car loan in order to get the best rates.

 

Current Ontario Car Loan Rates

The current average interest rate on new car loans in Ontario is around 5-7% for borrowers with good credit scores. For used cars, rates are generally 0.5-2% higher. Subprime borrowers with poor credit can expect to pay much higher interest rates from 10-25%.

Your actual interest rate will depend on multiple factors like your credit score, down payment amount, loan term length, and the lender. Borrowers with credit scores above 720 will qualify for prime rates starting around 3-5%, while those under 620 may only be approved for subprime loans above 15%.

Here are some examples of current rate ranges for Ontario car loans:

  • New car, Excellent credit (720+): 3.99%-5.99%
  • New car, Good credit (680-719): 5.99%-8.99%
  • New car, Fair credit (620-679): 8.99%-12.99%
  • Used car, Excellent credit: 4.99%-7.99%
  • Used car, Good credit: 6.99%-9.99%
  • Used car, Fair credit: 9.99%-14.99%
  • Subprime used car loan: 15%-25%

 

Checking your credit score ahead of time can give you an idea of what rate range you may qualify for. Improving your credit score and optimizing factors like your down payment can help you secure the most competitive interest rate.

 

Get Pre-Approved Before Visiting the Dealer

Getting a car loan pre-approval before you start shopping for a vehicle can give you a major advantage when it comes to negotiating the best rate. Pre-approvals allow you to know your credit score, interest rate, and maximum loan amount before ever stepping foot in a dealership. This puts you in a much stronger bargaining position.

A pre-approval is valid for 14 days, giving you plenty of time to find the right car while already knowing the terms of your financing.

You can get pre-approved for a car loan from several sources:

  • Your bank or credit union – Most major banks like TD, Scotiabank, and CIBC offer pre-approvals on auto loans.
  • Online lenders like Care Deal Canada – Quick and easy online applications for pre-approval.
  • Directly through a dealership – Many dealers will pre-approve you before negotiating price.

 

Going through a bank or online lender first means you can get pre-approved before even talking to a dealer. This allows you to negotiate purely on the purchase price of the vehicle, already knowing what rate you qualify for on your loan.

 

Tips for the Best Rate

There are a few key strategies you can use to try and get the lowest possible interest rate on your Ontario car loan:

First, shop around and get quotes from multiple lenders rather than just accepting the first rate you’re offered. Banks, credit unions, dealerships, and online lenders will all offer different rates based on their own formulas. Getting multiple quotes gives you leverage to secure the best deal. Shopping around with at least 3 lenders can save 0.5% to 1% off your rate.

Next, make the largest down payment you can comfortably afford. The higher your down payment, the lower the risk for the lender – so you’ll generally get a better interest rate. Putting 20% or more down is ideal, but any extra funds will help lower your rate.

You should also consider choosing a shorter loan term, like 3 years instead of 5 or 6. Shorter terms mean less interest paid over the life of the loan. Just keep in mind shorter terms come with higher monthly payments.

Finally, if you have poor credit, adding a creditworthy cosigner to your loan application can help you qualify for a lower rate. The cosigner’s good credit score balances out your score in the eyes of the lender. Just make sure the cosigner understands they are equally responsible for repaying the auto loan.

 

Loan Term Considerations

When financing a car purchase in Ontario, one of the most important decisions is choosing the length of your loan term. Loan terms are typically available from 12 months up to 96 months (8 years). The loan term length significantly impacts your monthly payments, total interest paid, and overall cost of the car loan.

Shorter loan terms like 24-36 months have lower monthly payments but require larger down payments. A shorter term saves money on interest since the loan is paid off quicker. However, not everyone can afford the larger monthly payments associated with short loan terms.

Longer terms like 72-96 months make the car more affordable each month by spreading payments out. However, you pay much more total interest over the life of the long-term loan. The average car loan term chosen in Ontario is 72 months.

Most experts recommend limiting your loan term to a maximum of 60 months. Loan terms over 60 months incur excessive interest charges and increase the risk of becoming underwater on your loan. However, longer terms may be necessary if you require lower monthly payments. Consider the shortest term you can comfortably afford when financing your car purchase.

 

Down Payment Options

While there’s no specific minimum down payment required by law in Ontario, most lenders prefer you put down at least 10-20% of the vehicle’s purchase price. With a larger down payment, you’ll generally qualify for a lower interest rate from lenders. This is because a bigger down payment reduces the lender’s risk – if you default on the loan, they have more equity to seize.

A 20% down payment can help you get the most favourable loan terms and interest rates. For a $30,000 vehicle purchase, that would equal a $6,000 down payment.

If you don’t have cash saved up, you may need to get creative with down payment sources. Borrowing from a retirement account, using earned income tax credits, or having a family member gift you money can help boost your down payment. However, a larger down payment does mean more money upfront.

 

Dealer Financing vs Bank

When it comes to financing a car purchase in Ontario, you have two main options – going through the dealership or getting a loan directly from a bank. There are pros and cons to each approach.

Dealership financing may offer lower interest rates or other incentives to encourage you to finance through them. Dealerships can offer rates as low as 0% for certain promotions. However, bank rates can also be very competitive, sometimes even lower than special promotional rates from dealers.

The loan approval experience may be faster and easier through a dealership versus a bank. Dealers are used to processing car loan applications quickly, while banks may take longer. However, banks can pre-approve you for an auto loan before you even visit the dealer, giving you added negotiating power.

Dealerships also have access to incentives from the manufacturer, like discounted interest rates on certain models. Banks do not have access to these special offers. However, banks may offer incentives like waived processing fees.

Overall, it’s recommended to check with both dealerships and banks/credit unions when shopping for a car loan. Getting multiple quotes allows you to compare all the options and make the most informed decision. Pre-approval from a bank also strengthens your position when negotiating with the dealer.

 

Co-Signing a Car Loan

Getting a co-signer on your auto loan application can help improve your chances of getting approved if you have little credit history or a low credit score. A co-signer agrees to be equally responsible for repaying the car loan if you are unable to make the payments.

Lenders typically prefer co-signers to have good or excellent credit (scores above 700), stable income, and a low debt-to-income ratio. Family members like parents often co-sign on loans for younger borrowers. The main risk for the co-signer is that they are liable for the remaining loan balance if you default.

Before getting a co-signer, try improving your own credit score and debt levels. If you still need the help, find someone willing and financially able to co-sign. Discuss the risks openly and have a plan for making payments so the co-signer doesn’t end up responsible.

 

Leasing vs Buying

When deciding how to finance a new car purchase in Ontario, two main options are leasing versus buying. There are pros and cons to each approach.

With a lease, you essentially rent the vehicle for a set period of time, usually between 2-4 years. At the end of the lease, you return the car to the dealer. You just pay for the depreciation that occurred during the lease term, which keeps monthly payments lower.

Some key pros of leasing include:

  • Lower monthly payments
  • Drive a newer car more often
  • Minimal upfront costs
  • Worry less about resale value

 

However, leasing also comes with some notable cons:

  • Never own the car
  • Mileage limits and wear restrictions
  • Extra fees at lease end for excess mileage or damage
  • Hard to get out of lease early

 

When you finance a car purchase, you own the vehicle at the end. This typically requires a higher down payment up front and higher monthly payments compared to leasing. But over time, building equity in the car as you pay it off can be advantageous.

Pros of buying include:

  • Build equity and own the asset
  • No mileage limits
  • Customize, modify or sell the car anytime
  • Potentially lower total cost long-term

 

Cons of buying a car on finance include:

  • Higher monthly car payments
  • Need to pay off loan to upgrade vehicles
  • Responsible for disposal when you’re done with car

 

When evaluating the total cost difference between leasing and buying, it depends on factors like the purchase price, down payment, interest rates, loan terms, lease terms, mileage, and more. Speaking with a financial advisor can help analyze your specific situation to determine if leasing or buying makes more financial sense for your needs.

 

New vs Used Car Loans

When it comes to financing, there are some key differences between new and used car loans in Ontario. New cars tend to have lower interest rates and longer loan terms available. New car loans typically have interest rates starting around 3-5%, while used car loans are higher at 5-8% on average.

New cars also give you the benefit of full manufacturer warranties and maintenance programs. With a new car, you won’t have to worry as much about surprise repair costs down the road.

However, used cars are substantially cheaper to purchase upfront. According to CarGurus, even a 2-3 year-old used car can be 20-40% less expensive than the same model brand new. The lower sticker price also means you may be able to get approved for a used car loan more easily if you have average credit.

Lenders sometimes offer longer terms up to 8 years for new cars, but average terms of 4-6 years for used vehicles. The longer term can lower your monthly payment on a new car, but may cost more in total interest.

When calculating the overall cost difference between new and used, consider the loan interest rate, loan term, projected maintenance costs, and how long you plan to keep the vehicle. New cars make more sense if you prioritize having the latest features and plan to own the car for many years after it’s paid off.

 

Refinancing a Car Loan

Refinancing your existing car loan is something to consider if you want to improve your rate, lower your monthly payments, or change your loan term. With refinancing, you take out a new loan to pay off your current auto loan. This can allow you to take advantage of better rates and terms.

You may want to refinance your car loan if you initially had a high-interest rate but have since improved your credit score. Rates are also lower now compared to recent years, so refinancing could allow you to save substantially on interest charges over the life of the loan. Generally, you’ll want to refinance if you can get at least 2 percentage points shaved off your rate.

The steps to refinance involve applying for a new car loan, then using those funds to pay off your existing loan. You will need to qualify based on your current credit score and other factors. Make sure to shop around and compare refinance offers from lenders like banks, credit unions, and online lenders. Your loan balance cannot exceed the car’s current value. There are usually no upfront fees to refinance.

Overall, refinancing your car loan at a lower rate can save you money each month and over the life of the loan. It’s worth exploring if your credit has improved or if current rates are substantially lower. Just be sure to compare all costs and terms first to ensure refinancing makes sense for your situation.

 

Alternatives to Traditional Loans

While most people take out a traditional car loan from a bank, dealership, or lender to finance their vehicle purchase, there are some other options you can consider. These alternatives may make sense in certain situations.

One alternative is a personal loan. These unsecured loans from your bank can provide funds that you can use towards a car purchase. Personal loans typically have lower interest rates than car loans and may be an option if you have good credit but don’t qualify for the best car loan rates for some reason.

Another option is a home equity line of credit (HELOC). If you have substantial equity built up in your home, you may be able to access those funds for a car purchase via a HELOC. The interest is usually tax-deductible as well. Just be cautious borrowing against your home equity.

Finally, some people choose to simply use cash to buy their vehicle outright rather than taking out any loan. This avoids interest payments but requires you to have the full vehicle price saved upfront. Buying an affordable used car with cash is often the least expensive option overall.

 

Summary

Getting the best car loan in Ontario requires doing your research upfront. Start by checking your credit score and addressing any issues, as this will impact the rates you qualify for. Shop around with multiple lenders and get pre-approved to strengthen your negotiating position. Aim for at least a 20% down payment if possible, and consider shorter loan terms to save on interest.

Optimize your loan by comparing rates across banks, dealerships, and brokers. Consider the pros and cons of leasing versus buying, and weigh used versus new vehicle loans. If needed, alternatives like co-signing or refinancing may help get better terms. Use online car payment calculators to estimate payments and educate yourself before visiting the dealer.

For further assistance, contact a financial advisor or see resources like the Financial Consumer Agency of Canada. With some preparation and diligence, you can secure the ideal auto financing loan for your needs and budget.

Questions About Car Loans in Ontario?

We offer car loans anywhere in Ontario but some of the main areas we service include.

Most lenders in Ontario require a minimum credit score between 650-700 for auto loan approval. However, you can get approved with scores as low as 600 depending on the lender. For the best rates, aim for a score of 720 or higher.

Lenders typically look for a down payment of at least 10-20% of the vehicle’s purchase price. The higher your down payment, the better rate you’ll qualify for. Putting 20% down or more is ideal to get approved and save on interest.

If you have bad credit, look for lenders that specialize in subprime lending, like Car Deal Canada. You will pay higher interest rates, so try adding a cosigner or putting more money down to offset your low credit score.

Leasing has lower monthly payments but you don’t own the car. Financing costs more each month but allows you to eventually own the vehicle. Compare total costs and ownership goals to decide which works best for you.

The lowest rates currently available are around 3-5% for borrowers with excellent credit scores above 720. Compare options across banks, dealerships, and online lenders to find the lowest rate you qualify for.

Getting the lowest rate requires a credit score over 720, at least 20% down payment, and a short loan term. Shopping around with multiple lenders and having a cosigner can also help you secure the most competitive interest rate.

The average used car loan rate in Ontario is 6-9% currently. Those with excellent credit can qualify for rates as low as 4-5%, while borrowers with poor credit will pay interest rates from 15-25% or higher.

Yes, some subprime lenders offer car loans for ODSP and OW recipients in Ontario. Interest rates are higher and loan amounts are lower. Proof of benefits and income is required for approval.

Most car loans in Ontario range from 2-8 years for the repayment term length. 4-6 years is typical for new cars, while used cars average loan terms of 2-5 years.

No, once you sign a car loan contract and drive the vehicle off the lot, you own the car. Voluntary repossession hurts your credit score. Make sure you can afford payments.

Yes, you must pay 8% provincial sales tax (PST) when financing a car purchase in Ontario. The PST is charged on the selling price less any trade-in allowance.

Making extra principal payments, refinancing at a lower rate, and paying bi-weekly instead of monthly can all help you pay off an auto loan faster and save on interest.

Students with no credit history should apply with a cosigner that has an established credit record. Banks and online lenders offer student auto loans to those with a creditworthy cosigner.

You must be at least 18 years old to apply for auto financing in your name in Ontario. Some lenders allow co-signers for borrowers as young as 16.

 

Check Your Credit Score

Lenders generally look for a credit score of 650 or higher when approving car loans in Ontario. However, you may still get approved with a score in the low 600s depending on the lender

The higher your credit score, the better interest rate you can qualify for. Borrowers with excellent credit (720+) will get the lowest rates, while those with poor credit will pay the highest interest rates.

Before applying for an auto loan, it’s a good idea to check your credit report from both Equifax and TransUnion. This will allow you to understand your current credit score and see details on your credit history. You can get free copies of your reports once per year from Equifax and TransUnion.

If your credit score needs improvement, some tips include paying bills on time, lowering credit utilization, and correcting any errors on your reports. Give yourself at least 3-6 months to improve your credit before applying for a car loan in order to get the best rates.

 

Current Ontario Car Loan Rates

The current average interest rate on new car loans in Ontario is around 5-7% for borrowers with good credit scores. For used cars, rates are generally 0.5-2% higher. Subprime borrowers with poor credit can expect to pay much higher interest rates from 10-25%.

Your actual interest rate will depend on multiple factors like your credit score, down payment amount, loan term length, and the lender. Borrowers with credit scores above 720 will qualify for prime rates starting around 3-5%, while those under 620 may only be approved for subprime loans above 15%.

Here are some examples of current rate ranges for Ontario car loans:

  • New car, Excellent credit (720+): 3.99%-5.99%
  • New car, Good credit (680-719): 5.99%-8.99%
  • New car, Fair credit (620-679): 8.99%-12.99%
  • Used car, Excellent credit: 4.99%-7.99%
  • Used car, Good credit: 6.99%-9.99%
  • Used car, Fair credit: 9.99%-14.99%
  • Subprime used car loan: 15%-25%

 

Checking your credit score ahead of time can give you an idea of what rate range you may qualify for. Improving your credit score and optimizing factors like your down payment can help you secure the most competitive interest rate.

 

Get Pre-Approved Before Visiting the Dealer

Getting a car loan pre-approval before you start shopping for a vehicle can give you a major advantage when it comes to negotiating the best rate. Pre-approvals allow you to know your credit score, interest rate, and maximum loan amount before ever stepping foot in a dealership. This puts you in a much stronger bargaining position.

A pre-approval is valid for 14 days, giving you plenty of time to find the right car while already knowing the terms of your financing.

You can get pre-approved for a car loan from several sources:

  • Your bank or credit union – Most major banks like TD, Scotiabank, and CIBC offer pre-approvals on auto loans.
  • Online lenders like Care Deal Canada – Quick and easy online applications for pre-approval.
  • Directly through a dealership – Many dealers will pre-approve you before negotiating price.

 

Going through a bank or online lender first means you can get pre-approved before even talking to a dealer. This allows you to negotiate purely on the purchase price of the vehicle, already knowing what rate you qualify for on your loan.

 

Tips for the Best Rate

There are a few key strategies you can use to try and get the lowest possible interest rate on your Ontario car loan:

First, shop around and get quotes from multiple lenders rather than just accepting the first rate you’re offered. Banks, credit unions, dealerships, and online lenders will all offer different rates based on their own formulas. Getting multiple quotes gives you leverage to secure the best deal. Shopping around with at least 3 lenders can save 0.5% to 1% off your rate.

Next, make the largest down payment you can comfortably afford. The higher your down payment, the lower the risk for the lender – so you’ll generally get a better interest rate. Putting 20% or more down is ideal, but any extra funds will help lower your rate.

You should also consider choosing a shorter loan term, like 3 years instead of 5 or 6. Shorter terms mean less interest paid over the life of the loan. Just keep in mind shorter terms come with higher monthly payments.

Finally, if you have poor credit, adding a creditworthy cosigner to your loan application can help you qualify for a lower rate. The cosigner’s good credit score balances out your score in the eyes of the lender. Just make sure the cosigner understands they are equally responsible for repaying the auto loan.

 

Loan Term Considerations

When financing a car purchase in Ontario, one of the most important decisions is choosing the length of your loan term. Loan terms are typically available from 12 months up to 96 months (8 years). The loan term length significantly impacts your monthly payments, total interest paid, and overall cost of the car loan.

Shorter loan terms like 24-36 months have lower monthly payments but require larger down payments. A shorter term saves money on interest since the loan is paid off quicker. However, not everyone can afford the larger monthly payments associated with short loan terms.

Longer terms like 72-96 months make the car more affordable each month by spreading payments out. However, you pay much more total interest over the life of the long-term loan. The average car loan term chosen in Ontario is 72 months.

Most experts recommend limiting your loan term to a maximum of 60 months. Loan terms over 60 months incur excessive interest charges and increase the risk of becoming underwater on your loan. However, longer terms may be necessary if you require lower monthly payments. Consider the shortest term you can comfortably afford when financing your car purchase.

 

Down Payment Options

While there’s no specific minimum down payment required by law in Ontario, most lenders prefer you put down at least 10-20% of the vehicle’s purchase price. With a larger down payment, you’ll generally qualify for a lower interest rate from lenders. This is because a bigger down payment reduces the lender’s risk – if you default on the loan, they have more equity to seize.

A 20% down payment can help you get the most favourable loan terms and interest rates. For a $30,000 vehicle purchase, that would equal a $6,000 down payment.

If you don’t have cash saved up, you may need to get creative with down payment sources. Borrowing from a retirement account, using earned income tax credits, or having a family member gift you money can help boost your down payment. However, a larger down payment does mean more money upfront.

 

Dealer Financing vs Bank

When it comes to financing a car purchase in Ontario, you have two main options – going through the dealership or getting a loan directly from a bank. There are pros and cons to each approach.

Dealership financing may offer lower interest rates or other incentives to encourage you to finance through them. Dealerships can offer rates as low as 0% for certain promotions. However, bank rates can also be very competitive, sometimes even lower than special promotional rates from dealers.

The loan approval experience may be faster and easier through a dealership versus a bank. Dealers are used to processing car loan applications quickly, while banks may take longer. However, banks can pre-approve you for an auto loan before you even visit the dealer, giving you added negotiating power.

Dealerships also have access to incentives from the manufacturer, like discounted interest rates on certain models. Banks do not have access to these special offers. However, banks may offer incentives like waived processing fees.

Overall, it’s recommended to check with both dealerships and banks/credit unions when shopping for a car loan. Getting multiple quotes allows you to compare all the options and make the most informed decision. Pre-approval from a bank also strengthens your position when negotiating with the dealer.

 

Co-Signing a Car Loan

Getting a co-signer on your auto loan application can help improve your chances of getting approved if you have little credit history or a low credit score. A co-signer agrees to be equally responsible for repaying the car loan if you are unable to make the payments.

Lenders typically prefer co-signers to have good or excellent credit (scores above 700), stable income, and a low debt-to-income ratio. Family members like parents often co-sign on loans for younger borrowers. The main risk for the co-signer is that they are liable for the remaining loan balance if you default.

Before getting a co-signer, try improving your own credit score and debt levels. If you still need the help, find someone willing and financially able to co-sign. Discuss the risks openly and have a plan for making payments so the co-signer doesn’t end up responsible.

 

Leasing vs Buying

When deciding how to finance a new car purchase in Ontario, two main options are leasing versus buying. There are pros and cons to each approach.

With a lease, you essentially rent the vehicle for a set period of time, usually between 2-4 years. At the end of the lease, you return the car to the dealer. You just pay for the depreciation that occurred during the lease term, which keeps monthly payments lower.

Some key pros of leasing include:

  • Lower monthly payments
  • Drive a newer car more often
  • Minimal upfront costs
  • Worry less about resale value

 

However, leasing also comes with some notable cons:

  • Never own the car
  • Mileage limits and wear restrictions
  • Extra fees at lease end for excess mileage or damage
  • Hard to get out of lease early

 

When you finance a car purchase, you own the vehicle at the end. This typically requires a higher down payment up front and higher monthly payments compared to leasing. But over time, building equity in the car as you pay it off can be advantageous.

Pros of buying include:

  • Build equity and own the asset
  • No mileage limits
  • Customize, modify or sell the car anytime
  • Potentially lower total cost long-term

 

Cons of buying a car on finance include:

  • Higher monthly car payments
  • Need to pay off loan to upgrade vehicles
  • Responsible for disposal when you’re done with car

 

When evaluating the total cost difference between leasing and buying, it depends on factors like the purchase price, down payment, interest rates, loan terms, lease terms, mileage, and more. Speaking with a financial advisor can help analyze your specific situation to determine if leasing or buying makes more financial sense for your needs.

 

New vs Used Car Loans

When it comes to financing, there are some key differences between new and used car loans in Ontario. New cars tend to have lower interest rates and longer loan terms available. New car loans typically have interest rates starting around 3-5%, while used car loans are higher at 5-8% on average.

New cars also give you the benefit of full manufacturer warranties and maintenance programs. With a new car, you won’t have to worry as much about surprise repair costs down the road.

However, used cars are substantially cheaper to purchase upfront. According to CarGurus, even a 2-3 year-old used car can be 20-40% less expensive than the same model brand new. The lower sticker price also means you may be able to get approved for a used car loan more easily if you have average credit.

Lenders sometimes offer longer terms up to 8 years for new cars, but average terms of 4-6 years for used vehicles. The longer term can lower your monthly payment on a new car, but may cost more in total interest.

When calculating the overall cost difference between new and used, consider the loan interest rate, loan term, projected maintenance costs, and how long you plan to keep the vehicle. New cars make more sense if you prioritize having the latest features and plan to own the car for many years after it’s paid off.

 

Refinancing a Car Loan

Refinancing your existing car loan is something to consider if you want to improve your rate, lower your monthly payments, or change your loan term. With refinancing, you take out a new loan to pay off your current auto loan. This can allow you to take advantage of better rates and terms.

You may want to refinance your car loan if you initially had a high-interest rate but have since improved your credit score. Rates are also lower now compared to recent years, so refinancing could allow you to save substantially on interest charges over the life of the loan. Generally, you’ll want to refinance if you can get at least 2 percentage points shaved off your rate.

The steps to refinance involve applying for a new car loan, then using those funds to pay off your existing loan. You will need to qualify based on your current credit score and other factors. Make sure to shop around and compare refinance offers from lenders like banks, credit unions, and online lenders. Your loan balance cannot exceed the car’s current value. There are usually no upfront fees to refinance.

Overall, refinancing your car loan at a lower rate can save you money each month and over the life of the loan. It’s worth exploring if your credit has improved or if current rates are substantially lower. Just be sure to compare all costs and terms first to ensure refinancing makes sense for your situation.

 

Alternatives to Traditional Loans

While most people take out a traditional car loan from a bank, dealership, or lender to finance their vehicle purchase, there are some other options you can consider. These alternatives may make sense in certain situations.

One alternative is a personal loan. These unsecured loans from your bank can provide funds that you can use towards a car purchase. Personal loans typically have lower interest rates than car loans and may be an option if you have good credit but don’t qualify for the best car loan rates for some reason.

Another option is a home equity line of credit (HELOC). If you have substantial equity built up in your home, you may be able to access those funds for a car purchase via a HELOC. The interest is usually tax-deductible as well. Just be cautious borrowing against your home equity.

Finally, some people choose to simply use cash to buy their vehicle outright rather than taking out any loan. This avoids interest payments but requires you to have the full vehicle price saved upfront. Buying an affordable used car with cash is often the least expensive option overall.

 

Summary

Getting the best car loan in Ontario requires doing your research upfront. Start by checking your credit score and addressing any issues, as this will impact the rates you qualify for. Shop around with multiple lenders and get pre-approved to strengthen your negotiating position. Aim for at least a 20% down payment if possible, and consider shorter loan terms to save on interest.

Optimize your loan by comparing rates across banks, dealerships, and brokers. Consider the pros and cons of leasing versus buying, and weigh used versus new vehicle loans. If needed, alternatives like co-signing or refinancing may help get better terms. Use online car payment calculators to estimate payments and educate yourself before visiting the dealer.

For further assistance, contact a financial advisor or see resources like the Financial Consumer Agency of Canada. With some preparation and diligence, you can secure the ideal auto financing loan for your needs and budget.

Get Approved Today

See if you qualify in under 60 seconds

Questions About Car Loans in Ontario?

We offer car loans anywhere in Ontario but some of the main areas we service include.

Most lenders in Ontario require a minimum credit score between 650-700 for auto loan approval. However, you can get approved with scores as low as 600 depending on the lender. For the best rates, aim for a score of 720 or higher.

Lenders typically look for a down payment of at least 10-20% of the vehicle’s purchase price. The higher your down payment, the better rate you’ll qualify for. Putting 20% down or more is ideal to get approved and save on interest.

If you have bad credit, look for lenders that specialize in subprime lending, like Car Deal Canada. You will pay higher interest rates, so try adding a cosigner or putting more money down to offset your low credit score.

Leasing has lower monthly payments but you don’t own the car. Financing costs more each month but allows you to eventually own the vehicle. Compare total costs and ownership goals to decide which works best for you.

The lowest rates currently available are around 3-5% for borrowers with excellent credit scores above 720. Compare options across banks, dealerships, and online lenders to find the lowest rate you qualify for.

Getting the lowest rate requires a credit score over 720, at least 20% down payment, and a short loan term. Shopping around with multiple lenders and having a cosigner can also help you secure the most competitive interest rate.

The average used car loan rate in Ontario is 6-9% currently. Those with excellent credit can qualify for rates as low as 4-5%, while borrowers with poor credit will pay interest rates from 15-25% or higher.

Yes, some subprime lenders offer car loans for ODSP and OW recipients in Ontario. Interest rates are higher and loan amounts are lower. Proof of benefits and income is required for approval.

Most car loans in Ontario range from 2-8 years for the repayment term length. 4-6 years is typical for new cars, while used cars average loan terms of 2-5 years.

No, once you sign a car loan contract and drive the vehicle off the lot, you own the car. Voluntary repossession hurts your credit score. Make sure you can afford payments.

Yes, you must pay 8% provincial sales tax (PST) when financing a car purchase in Ontario. The PST is charged on the selling price less any trade-in allowance.

Making extra principal payments, refinancing at a lower rate, and paying bi-weekly instead of monthly can all help you pay off an auto loan faster and save on interest.

Students with no credit history should apply with a cosigner that has an established credit record. Banks and online lenders offer student auto loans to those with a creditworthy cosigner.

You must be at least 18 years old to apply for auto financing in your name in Ontario. Some lenders allow co-signers for borrowers as young as 16.

Get Approved Today

See if you qualify in under 60 seconds