In NL, what should I know about minimum down payment for car loans?

In Newfoundland and Labrador, similar to other Canadian provinces, there is no specific provincial or federal law mandating a universal minimum down payment for car loans. Instead, the minimum down payment is primarily determined by individual lenders - banks, credit unions, and captive finance companies - based on their internal risk assessment policies. This assessment considers various factors including your credit history and score, income stability, debt-to-income ratio, the vehicle's value and age, and the proposed loan term. A down payment also helps cover immediate costs like the Harmonized Sales Tax (HST) in Newfoundland and Labrador, reducing the amount financed.

While 0% down payment options exist, especially for well-qualified borrowers or during promotional periods, lenders often prefer or require a down payment, typically ranging from 5% to 20% of the vehicle's purchase price. In the current economic climate anticipated for 2025, with potentially higher interest rates and increased lending caution, a substantial down payment can significantly improve your loan approval chances, secure a more favourable interest rate, and reduce your overall borrowing costs.

From a consumer perspective, providing a larger down payment is highly advantageous. It immediately reduces your principal loan amount, leading to lower monthly payments and less interest paid over the life of the loan. Furthermore, it lowers your Loan-to-Value (LTV) ratio, mitigating the risk of negative equity (owing more than the car is worth) and providing a stronger financial position should you need to sell the vehicle sooner than expected. This strategic financial move offers greater flexibility and long-term savings, making your car ownership more affordable and secure in NL.