Bad credit is costing you thousands more on car loans — here's how to fight back

The problem is that owning and financing a vehicle is getting more expensive. According to Turo's 2025 Car Ownership Index, conducted by Leger, the average Canadian car owner now spends almost $5,500 per year on vehicle costs (2) — a 9% jump from 2024. Layer in a bad credit score and you're looking at car loan interest rates that could add thousands of dollars to the total cost of vehicle ownership.

The good news? Bad credit doesn't mean no car. It just means you need a different playbook.

First, the basics: What is a bad credit score?

Your credit score is a three-digit number between 300 and 900, assigned by one of Canada's two major credit bureaus: Equifax and TransUnion (3). The higher your score, the less risky you are as a borrower and the easier it is to qualify for a better interest rate on any type of debt, including car loans.

According to Equifax, a score of 660 or above is generally considered good (4). A score in the 300 to 559 range is typically viewed as poor (5), and anything in between is considered fair.

That means if your credit score sits below 660, you may have a harder time qualifying for a standard car loan through a bank or credit union — and that translates into higher loan costs and larger debt.

For this reason, it’s absolutely critical to check your credit score before assessing your borrowing options. You can check your credit history for free through Equifax (available to all Canadians) or through third-party platforms such as your bank (6).

So, what happens if you check your score and it’s less than ideal?

Can you qualify for a car loan with a bad credit score?

As of October 2025, the average car loan interest rate in Canada was around 6.5%, according to Statistics Canada (7). Borrowers with good credit can expect to pay somewhere in the 5% to 7% range for a car loan. But if your credit is poor, rates from specialty and online lenders can reach as high as 29.99% — and sometimes higher (8).

That difference in rates isn’t just a number. On a $30,000 car loan over 60 months, the gap between a 7% rate and a 25% rate works out to more than $16,000 in additional interest paid over the life of the loan. That's why shopping around for the best loan terms matters so much.

Even with a lower credit score, it’s possible to find financing for purchases, such as used or new vehicle. While you may not qualify for the lowest rate or the most favourable terms, you should still shop around to find the lowest rate.

In general, if your credit score is less than ideal, you won’t qualify for a loan through a traditional bank or credit union. Instead, look for alternative lenders or comparison shop using an online lending platform.

Remember, the higher the interest rate the more of your hard-earned income will go to repaying the car loan.

Consider comparison shopping using a loan consolidator, like Loans Canada helps you compare and find the best rates, and you only need to fill out one application.

Where to find bad credit car loans

Whether you’re buying a car through a dealership, at a used car lot or from a private seller, you never want to agree to the first set of loan terms offered.

Contact several lenders and compare terms and rates. That means reviewing the interest rate, loan amount, repayment term and any additional fees. Each factor can be negotiated and the more you know the better chance you have of finding a loan with a manageable payment.

To help, here are five online loan platforms that specialize in connecting Canadians with bad credit to auto financing. One advantage of using an online loan consolidator is that your credit score won’t drop due to multiple inquiries. One disadvantage is that each consolidator works with dozens of alternative lenders — but there are hundreds of lenders to choose from across Canada. As a result, be sure to do your own research and confirm that an offered loan term is actually a good deal for you and your financial situation.

Loans Canada

Loans Canada, a Canadian financial services marketplace, connects borrowers — including those who have recently filed for bankruptcy or entered into a consumer proposal — with a network of lenders.

As a loan consolidator, Loans Canada offers various types of loans, including debt consolidation, personal loans and auto loans.

Auto loan interest rates through the platform can range from as low as 2.99% to as high as 46.96%, with loan amounts from $500 to $50,000 and terms from 12 to 84 months (9).

One distinctive feature: borrowers who have worked with Loans Canada's lender network can rate and review those lenders, so you can check a lender's track record before signing anything.

There is, however, one limitation: The loan process isn't entirely online. Once you submit your application, matched lenders will contact you directly with their offers.

Loans Canada

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My Auto Approval

My Auto Approval is online auto loan consolidator whose speciality is finding credit options for car buyers with less than ideal credit histories. Whether your are shopping for a new or used car, the My Auto Approval marketplace can help. This online consolidator works with traditional lenders, such as BMO, National Bank and TD Bank, as well as alternative lenders, to help you find competitive auto loans.

Using their online portal, select whether you’re buying a new or used car then fill out and submit the online application. You’ll be contacted, directly, by lenders with their best auto loan offers. Just select the offer that works best for you and finalize the loan details.

LoanConnect

LoanConnect is an online loan search platform based in London, ON that connects borrowers to a network of more than 30 lenders across Canada (10). The platform works with all credit profiles, including those going through a consumer proposal or past bankruptcy.