New vs. Used Car Financing in Canada: Rates, Terms, and Smart Shopping

Rate Differences You’ll See
New-car financing may come with promotional APRs from the manufacturer’s captive lender. Used-car loans usually have higher rates because of vehicle age, mileage, and resale risk. However, the lower purchase price on a used car can still reduce your overall borrowing cost.

Terms, Fees, and Taxes
Expect terms from 36 to 84 months; longer terms mean more interest paid over time. Don’t forget provincial sales tax, licensing, and dealer fees in your budget. Ask lenders for the APR and total interest over the term to compare apples to apples.

Certified Pre-Owned vs. Private Sale
CPO vehicles from franchised dealers may qualify for better rates and include inspections or warranties. Private sales can be cheaper upfront but often require your own financing and may come with higher rates or shorter terms.

Refinancing as a Tool
If you bought at a higher APR, refinancing later—after credit improves or rates drop—can reduce your monthly payment or total interest. Check for any prepayment penalties and confirm the new lender’s fees.

When New Makes Sense
If you’ll keep the car 7–10 years, a reliable new model with low APR and warranty coverage can be economical. If you plan to upgrade in 3–4 years, a well-priced used vehicle can minimize depreciation and interest.

Bottom Line
Run the numbers for both scenarios. The best choice balances reliability, warranty, term length, and total cost—not just the monthly payment.