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

In Prince Edward Island, much like the rest of Canada, there is no specific federal or provincial law that dictates a universal minimum down payment for car loans. Instead, minimum down payment requirements are solely determined by individual lenders-including banks, credit unions, and captive finance companies-based on their comprehensive risk assessment of the applicant and the vehicle. This assessment considers your credit score and history, the vehicle's value and age, the loan term, and your overall debt-to-income ratio. In the current 2025 market, characterized by potentially higher interest rates and economic uncertainties, lenders may be more inclined to require or prefer larger down payments to mitigate their risk, especially for applicants with lower credit scores or for longer loan terms.

A higher down payment offers significant advantages to you, the consumer. It directly reduces the principal loan amount, which translates into lower monthly payments and substantial savings on interest charges over the life of the loan. Furthermore, a larger down payment immediately improves your loan-to-value (LTV) ratio, meaning you build equity faster and significantly reduce the risk of being "upside down" on your loan, where you owe more than the car is worth. This financial prudence often makes you a more attractive borrower, potentially qualifying you for better interest rates and easier loan approval. While PE doesn't set minimums, remember that the 15% HST on the vehicle purchase price is an upfront cost that a down payment can help cover, making a 10-20% down payment a generally recommended target for securing more favourable terms and greater financial stability.