A car, whether right off the assembly line or new to you, can be one of the biggest purchases you make. Insurers assess many factors – including your driving record – when calculating your premium. Your insurance rates are also determined, in part, by the type of car you drive. Generally, the harder your car is to steal and the less expensive it is to repair, the less you pay for insurance.
Auto insurance is regulated and legally required in each province and territory in Canada.
Each province and territory sets mandatory auto coverage requirements that you must purchase to legally operate your vehicle.
Factors that determine your rate
When calculating your insurance premium, some of the factors that auto insurers may consider include:
Vehicle make, model, year and safety features
Your age and gender and marital status
Your driving and insurance history, which includes claims and convictions, and may include other factors such as whether or not you have taken driving training
How long you have had your licence
Where you live
How frequently you drive/how many kilometres per year
If your car is also used for commercial purposes
Your personal driving history and that of other household drivers who are listed on your auto insurance policy
Your current driver’s license class
Market conditions
How market conditions impact auto insurance rates
Like any product market conditions affect the price of auto insurance. Inflation is one of many factors taken into consideration by insurers. Some other market conditions that contribute to the cost of your auto insurance premium include:
The cost of repairing damage after a collision or loss event. Windshields with built-in rain sensors are more expensive to replace than those without. Increased technology in newer vehicles also increases the cost of repairs. In addition to high-tech parts, insurers also factor in the cost of appraisals, labour, towing services, and potential rental vehicles.
Changes in the marketplace. When goods, services, and labour are in high demand and supplies are low, prices rise. In addition to repairs, your auto insurance also provides coverage for bodily injury liability. Auto insurers adjust rates to ensure they can cover future claims.
Increasing rates of theft and fraud. Auto theft is on the rise in Canada. A staged collision can involve exaggerated injuries, premeditated collisions, medical services fraud, false property theft, and more. Theft and fraud are multi-billion-dollar problems that are increasing the cost of auto insurance for all drivers. To learn more about how the industry is working to fight fraud, visit Équité Association.
Generally, the less likely your car is to be stolen, damaged or in a collision as well the less expensive it is to repair, the less you will pay to insure it.
Working with an insurance representativewho understands your auto insurance requirements can help you choose the right coverage for your vehicle.
How the vehicle you drive impacts your insurance
SUV? Truck? Sedan? It’s not just who drives the vehicle. Insurers also consider the specific vehicle you are insuring when writing and pricing your auto policy.
A vehicle’s make, model, year, value and potential repair costs are all considered when an insurer sets a rate for your car insurance policy. Safety features including car alarms, number of airbags, collision avoidance technology and how well your vehicle protects occupants in a collision may also be considered.
The vehicle you buy impacts your insurance rate in a number of ways. Here are 3 things to consider when you’re getting ready to buy or lease a car:
Vehicles that are more likely to be stolen are typically more expensive to insure.
The Canadian Loss Experience Automobile Rating (CLEAR) system rating is built on insurance claims data. Insurers use CLEAR to assess how likely it is that a specific vehicle will be involved in a claim and what that claim will likely cost.
FAQs
An auto lender considers several factors – including your credit score, your credit history, income, debts, and down payment – when deciding what interest rate to offer you. Auto lenders will generally consider a number of factors when they're determining the interest rate and loan terms to offer you.
How are auto loan rates determined? ›
The amount of interest you may pay can vary a lot since the APR is determined based on a variety of factors. Among others, these factors typically include credit history, amount financed, length of the term, age of collateral, vehicle, and the down payment. The better your credit, the lower the interest rate.
How are auto rates determined? ›
Auto insurance rates depend on factors such as your age, gender, location, the kind of car you drive, your driving record and possibly even your credit score.
Who sets auto loan rates? ›
Auto loan rates are dictated by the time of year, the type of vehicle, the borrower's credit score and more. But the Fed sets the benchmark rate on which auto loan lenders base their rates.
What is a good auto interest rate? ›
Average Car Loan Interest Rates by Credit Score
| Credit Score Range | New Car Loan Rates | Used Car Loan Rates |
|---|
| 661 to 780 | 7.01% | 9.73% |
| 601 to 660 | 9.60% | 14.12% |
| 501 to 600 | 12.28% | 18.89% |
| 300 to 500 | 14.78% | 21.55% |
1 more rowAn interest rate under 5% is a great rate for a 72-month auto loan. However, the best loan offers are only available to borrowers who have the best credit scores and payment histories.
Why is my APR so high for a car loan? ›
The length of the loan you take out to pay for your car is going to have an affect on the interest rate in most cases. Typically, the shorter the length of time to repay the loan, the lower the interest rate and vice versa.
Can you negotiate auto rates? ›
Yes, just like the price of the vehicle, the interest rate is negotiable. Dealers may not offer you the lowest rate that you qualify for. To get the best interest rate, shop around with multiple lenders and negotiate.
Why is my auto rate so high? ›
While it can seem arbitrary, there are actual reasons you can see your price go up and down. Car insurance rates can change based on factors like claims, driving history, adding new drivers to your policy, and even your credit score.
Are auto rates expected to go down? ›
Lower Auto Loan Rates Could Make 2024 a Good Time To Buy or Refinance. While market predictions are bullish on the funds rate — and by extension, auto loan rates — finally coming back down in 2024, it's still not a guarantee. Powell and others at the Fed remain committed to their target of 2% inflation.
Average car loan interest rates by credit score
| Credit score | Average APR, new car | Average APR, used car |
|---|
| Superprime: 781-850. | 5.38%. | 6.80%. |
| Prime: 661-780. | 6.89%. | 9.04%. |
| Nonprime: 601-660. | 9.62%. | 13.72%. |
| Subprime: 501-600. | 12.85%. | 18.97%. |
2 more rowsCar Loan APRs by Credit Score
Excellent (750 - 850): 2.96 percent for new, 3.68 percent for used. Good (700 - 749): 4.03 percent for new, 5.53 percent for used. Fair (650 - 699): 6.75 percent for new, 10.33 percent for used. Poor (450 - 649): 12.84 percent for new, 20.43 percent for used.
What interest rate can I get with a 800 credit score car loan? ›
Average auto loan interest rates by credit score
| Personal FICO score | Average interest rate for new car loans | Average interest rate for used car loans |
|---|
| 781 to 850 | 5.64% | 7.66% |
| 661 to 780 | 7.01% | 9.73% |
| 601 to 660 | 9.60% | 14.12% |
| 501 to 600 | 12.28% | 18.89% |
1 more rowMar 4, 2024
The average auto loan interest rate in the fourth quarter of 2023 was 7.18% for new vehicles and 11.93% for used vehicles, according to Experian. However, the rate you receive on a car loan will depend on your credit scores. The higher your scores, the lower your auto loan rate.
Who has the cheapest auto loan rates? ›
Compare Car Loan Rates
| Top Auto Loan Lender | Lowest APR | Our Award |
|---|
| PenFed Credit Union | 5.24% | Best Credit Union Auto Loan |
| Auto Approve | 5.24%** | Best Auto Refinance Rates |
| Consumers Credit Union | 6.54% | Excellent Credit Union Auto Loan |
| Auto Credit Express | Varies | Best Auto Loan for Bad Credit |
3 more rowsUse the following list to help guide you toward your goal of learning how to get a lower interest rate on your next vehicle loan.
- Shop for the Best Total Amount Instead of the Best Monthly Payment. ...
- Get Quotes from Familiar Institutions. ...
- Do Your Research. ...
- Don't Apply for More Than One Loan Every Two Weeks.
Basically to find your APR, you calculate one year, or 12 months, times your interest rate. For example, say you have a 3% interest rate on your loan. You then multiply . 03 x 12 and there is your APR at 3.6%.
What is my car interest rate determined mostly by? ›
Most people know that their credit score is one of the top determining factors in what kind of rate they will receive. The lower the credit score, the higher the interest rate, and the higher the credit score, the lower the interest rate.
How is interest calculated on car loans? ›
Interest on an auto loan is calculated using simple interest, not compound interest, meaning the interest doesn't earn interest. Interest on a car loan is often front-loaded so that early payments pay more toward interest and less toward the paydown of the principal loan balance.
Are auto loans variable or fixed rate? ›
Credit cards and home equity lines of credit are two examples of loans with variable interest rates. A fixed interest rate typically doesn't change throughout the loan term. Mortgages and auto loans are two common examples of fixed-rate loans.
