Auto Loans in Canada: How to Get Approved in 2025

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What Canadian Lenders Evaluate
Auto lenders in Canada assess your credit score (300–900 range), verifiable income, employment stability, debt-to-income ratio, and the loan-to-value (LTV) of the vehicle. Strong files usually show consistent pay deposits, a DTI under ~40%, and a reasonable down payment. A higher LTV—financing taxes, fees, and add-ons—can push your rate up or lead to a decline.

New vs. Used: Cost vs. Rate
New vehicles often qualify for lower promotional APRs but have higher sticker prices and faster depreciation. Used vehicles can be cheaper overall, but interest rates are typically higher and terms may be shorter. Always compare the total cost of borrowing and not just the payment.

Down Payment and Term Strategy
Aim for 10%–20% down to reduce LTV and improve approval chances. Keep terms as short as your budget allows. Seven- or eight-year terms lower the payment but increase total interest and the risk of negative equity if you sell early.

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Approval Tips for Limited or Bad Credit

  • Pre-qualify with multiple lenders or credit unions for soft-pull estimates.
  • Consider a co-signer with strong credit and stable income.
  • Pick a modest vehicle to keep LTV and payment manageable.
  • Document income (pay stubs, T4s, bank statements for contractors).

Avoid Costly Add-Ons
Products like extended warranties and gap coverage can be useful, but negotiate them separately and avoid rolling extras into the loan if possible. Ask for the “out-the-door” price and confirm the APR before signing.

Bottom Line
Plan your budget, compare at least three quotes, and structure the deal (price, down payment, term) before visiting the dealership to maximize approval odds and savings.