Most Canadians finance or lease their vehicle. The way you pay can add thousands of dollars to the real cost of a car, so it is worth understanding interest rates, loan terms and leasing before you sit down in a finance office.
Last updated: October 28, 2026
Your main options
| Option | How it works | Good for |
|---|---|---|
| Bank or credit union loan | You borrow from your financial institution and buy the car outright. | Comparing rates and keeping negotiation simple. |
| Dealer or manufacturer financing | The dealer arranges the loan, sometimes with promotional rates on new vehicles. | Buyers who qualify for advertised low-rate offers. |
| Leasing | You pay for the vehicle’s depreciation over the term, then return it or buy it. | Drivers with predictable mileage who like a new car every few years. |
| Subprime or bad-credit lenders | Lenders that accept weaker credit at higher rates. | Rebuilding credit, with caution about rates and fees. |
Understand the total cost of borrowing
The payment is only part of the story. Two loans with the same payment can cost very different amounts if one runs 60 months and the other 96. Longer terms also increase the risk of negative equity, where you owe more than the car is worth. Use our car payment calculator to compare terms side by side.
Bad credit car loans
If your credit score is low, you may still get approved, but expect higher interest and stricter conditions. Before signing:
- Check your credit report with Equifax and TransUnion and correct errors.
- Save a larger down payment to reduce the amount financed.
- Read every add-on (warranties, insurance products, fees) and refuse what you do not need.
- Avoid any lender that asks for an upfront fee before approving a loan.
The Financial Consumer Agency of Canada publishes free guidance on car loans and leases at canada.ca.
Questions to ask any lender
- What is the annual interest rate and the total cost of borrowing?
- Is the rate fixed or variable?
- Are there fees for paying off the loan early?
- Which products are bundled into the loan, and are they optional?
- What happens if I miss a payment?
Leasing basics
With a lease you pay for the vehicle’s expected depreciation plus a finance charge, then return the vehicle or buy it at the residual value. Leases include an annual kilometre allowance, and extra kilometres or excess wear are charged at the end. Leasing usually suits drivers with predictable mileage who want a new vehicle every few years. Our guide Car loan vs leasing in Canada compares the two with a worked example.
Down payments and trade-ins
A larger down payment lowers the amount financed and the interest you pay. In provinces with harmonized sales tax, trading in a vehicle to a dealer can also reduce the tax on your purchase, because tax is often calculated on the price minus the trade-in value; confirm the rule in your province.
Pre-approval first
A pre-approval from your bank or credit union tells you how much you can borrow and at what rate before you negotiate. It gives you a benchmark: if the dealer offers better terms, you can take them; if not, you already have financing in place.
Financing guides and tools
Zones.autos is not a lender and does not arrange financing. Rates shown in our guides are examples; your offer depends on your credit, the vehicle and the lender.