How Canadian Auto Loans Work

Auto loans in Canada are simple interest loans — interest is calculated on the outstanding balance, not the original principal. Rates typically range from 0% (promotional financing from dealers) to 20%+ for subprime borrowers. Most Canadians finance for 60–84 months.

The 20/4/10 Rule for Car Buying

• 20% minimum down payment
• 4 years maximum loan term (to avoid being "underwater")
• 10% maximum of gross monthly income on all transportation costs

Dealer vs Bank Financing

Dealer financing is convenient but rarely the best rate. Always get pre-approved from your bank or credit union before visiting a dealership — this gives you a negotiating anchor and protects you from rate markups.