The Canadian auto finance market is undergoing major shifts in 2025, as rising interest rates and tighter lending policies reshape how consumers purchase vehicles. The country’s largest banks, including RBC, TD, and Scotiabank, have all announced updated loan terms this year. For Canadians planning to finance their next car purchase, understanding the new Canada Car Loan Rates 2025 is essential for making informed decisions.
Why Car Loan Rates Are Increasing
Auto loan rates in Canada are directly tied to the broader economic environment. The Bank of Canada has maintained higher interest rates to control inflation, and this has a ripple effect across all lending products, including auto loans.
In 2025, most banks have raised their auto financing rates to reflect these macroeconomic pressures. Rising vehicle prices and longer loan terms also contribute to the increased costs, making affordability a central concern for consumers. Buyers who once enjoyed low interest financing are now adjusting to higher monthly payments and stricter approval standards.
RBC Car Loan Updates in 2025
The Royal Bank of Canada (RBC), one of the largest lenders in the country, has revised its auto loan rates upward. Key highlights include:
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New Car Loans: Interest rates starting from 7.2% APR, depending on credit profile and loan term.
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Used Car Loans: Rates beginning at 8.5% APR, slightly higher due to increased risk.
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Loan Terms: Maximum financing up to 84 months, though shorter terms are encouraged with slightly lower rates.
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Special Programs: RBC continues to offer discounts for existing clients who bundle auto loans with banking products.
For many customers, RBC remains a popular choice thanks to its wide dealer network and convenient online application system, though affordability is becoming more challenging under Canada Car Loan Rates 2025.
TD Auto Finance 2025
TD Bank, through its TD Auto Finance division, has also increased rates in line with industry trends. Notable updates include:
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New Car Financing: Starting at 7.5% APR, depending on credit score and vehicle type.
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Used Car Financing: Typically 8.8%–9.5% APR, reflecting higher risk factors.
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Flexible Terms: TD offers terms between 36 to 96 months, appealing to those seeking lower monthly payments despite higher total costs.
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Dealer Incentives: TD has expanded partnerships with dealerships nationwide, allowing faster approvals and promotional offers for select models.
The bank emphasizes flexibility but warns customers that extending loan terms significantly increases total interest paid over time.
Scotiabank Car Loans in 2025
Scotiabank, another major lender, has positioned itself as competitive by offering slightly more attractive incentives:
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New Car Loans: Rates beginning at 7.0% APR, among the lowest in the Big Five banks.
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Used Car Loans: Starting at 8.2% APR, though eligibility is stricter compared to new vehicles.
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Eco-Friendly Discounts: Lower rates (by 0.25–0.5%) for hybrid and electric vehicles, supporting Canada’s green initiatives.
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Digital Applications: Streamlined approvals through Scotia’s online system, making it easier for younger buyers to apply remotely.
Scotiabank’s focus on sustainable lending gives it an edge in attracting environmentally conscious buyers. Many drivers considering EVs are leaning toward Scotia under the Canada Car Loan Rates 2025 framework.
Impact on Buyers
For Canadian consumers, these updates mean higher costs and stricter borrowing conditions. A $35,000 car financed at 7.5% APR over 72 months can result in monthly payments of nearly $600, with thousands in interest over the life of the loan. Many households are rethinking whether to buy new, turn to the used car market, or lease instead.
Higher rates also mean that borrowers with weaker credit profiles face more difficulty securing financing. In some cases, buyers are turning to credit unions or alternative lenders, though these often carry even higher rates.
Strategies to Manage Higher Loan Costs
Experts recommend several ways to cope with the rising Canada Car Loan Rates 2025:
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Improve credit scores before applying to secure the lowest available rates.
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Make larger down payments to reduce the loan amount and monthly payments.
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Consider shorter loan terms to save on total interest, even if monthly payments are higher.
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Shop around: Compare offers from banks, credit unions, and online lenders.
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Evaluate leasing as an alternative if ownership is not a priority.
By taking these steps, buyers can reduce the financial burden of higher rates.
Market Outlook
Industry analysts predict that car loan rates will remain elevated through most of 2025, with only gradual relief expected if inflation stabilizes. However, growing competition among banks may lead to more promotional offers, particularly for eco-friendly vehicles.
The Canada Car Loan Rates 2025 trend reflects both economic realities and the ongoing transition in the automotive sector. While financing is more expensive, Canadian drivers still have options to make ownership feasible with the right strategy.
FAQs
What are the average car loan rates in Canada in 2025?
Rates for new cars range from 7.0% to 7.5% APR, while used cars average between 8.2% and 9.5%.
Which Canadian bank offers the lowest car loan rates in 2025?
Scotiabank currently provides some of the lowest rates, starting at 7.0% APR for new cars.
Are longer loan terms available in 2025?
Yes, terms of up to 84 months are common, with TD even offering up to 96 months, though interest costs rise significantly.
Do banks offer discounts for electric vehicles?
Yes, Scotiabank provides 0.25–0.5% lower rates for hybrid and electric vehicles.
Will car loan rates decrease later in 2025?
Experts predict rates will remain high for most of the year, with possible easing only if inflation cools.
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