How to refinance a car loan in Canada

Step 1: Check that refinancing is worth doing

Before you apply, compare the rate you pay today with what the market offers now. If you have paid on time for a year and your credit has improved, the gap is often two to four percentage points.

• Find your current annual percentage rate and remaining balance on your last statement.
• Check the payoff amount, not just the balance, since interest accrues daily.
• Confirm your current lender does not charge an early payoff penalty.
• Estimate your remaining term. Under 12 months, refinancing rarely pays.

Step 2: Apply with the vehicle details

You will need your VIN, the odometer reading, the vehicle year, make and model, and an estimate of your current balance. Pre-qualification does not require a credit check, so it costs nothing to see your options.

Step 3: Compare the offer on total cost

A lower payment is not the same as a lower cost. Always compare the total interest you will pay across the remaining life of both loans.

• Compare the annual percentage rate, not the advertised rate.
• Ask what fees are being added to the new principal.
• Look at the amortization: a 72 month term on a five year old car usually costs more overall.
• Confirm the first payment date so you do not double up with your old lender.

Step 4: Sign and let the payout happen

Documents are sent through DocuSign. Once signed, the new lender pays out your old loan directly and registers the new lien. You receive confirmation of the payout and your new payment schedule.

Who qualifies to refinance

Most Canadian drivers with an active auto loan qualify. The vehicle, the remaining balance and your payment history matter more than a perfect credit score.

• The vehicle is registered, insured and roadworthy, with no active insurance claim against it.
• The loan is an auto loan or a dealer-arranged finance contract, not a lease.
• You have made at least a few months of payments on the current loan.
• The vehicle is not already pledged as security on a separate title or payday loan.
• You live outside Quebec, where our lending partners do not currently operate.

What to watch for before you sign

A lower payment is not automatically a lower cost. Check these four things before you agree to new terms.

• The full cost of borrowing, not just the monthly payment: a longer term can lower the payment and raise the total interest.
• Payout penalties on your current loan, such as an early payoff fee or a discharge administration charge.
• Lender fees rolled into the new balance, which quietly increase what you owe.
• The vehicle value against your balance. If you owe far more than the car is worth, refinancing may not be approved without extra down payment.