Car Loan Glossary apr

What is an auto loan APR in Canada in Canada?

In Canada, the Annual Percentage Rate (APR) on an auto loan represents the true, all-inclusive annual cost of borrowing, extending beyond the nominal interest rate to encompass most fees and charges associated with the loan, such as administration fees, loan origination fees, and sometimes even mandatory credit insurance premiums if bundled. This comprehensive figure is expressed as a single percentage, providing a standardized metric for consumers. A critical development in Canadian auto finance is the amendment to the Criminal Code (s.347), which, effective January 1, 2025, sets the criminal interest rate at 35% APR. This significant legislative measure is designed to robustly protect consumers from predatory lending practices and prohibit excessively high-cost loans in the auto finance market. Canadian lenders are legally obligated under federal and provincial consumer protection legislation to clearly disclose the APR, ensuring transparency. For consumers, understanding the APR is paramount as it enables an "apples-to-apples" comparison between different loan offers, reveals the total financial burden of the loan beyond just the monthly payment, and safeguards against hidden costs, ultimately empowering them to make informed and responsible borrowing decisions.

Need more help?

Explore our full glossary or get in touch with our financing experts.

Top