Auto Loan
Quick Definition
A secured loan used to finance a vehicle purchase, with the vehicle as collateral.
Full Explanation
An auto loan is a secured installment loan used to finance the purchase of a new or used vehicle. The vehicle itself serves as collateral. In Canada, auto loan rates typically range from 0% (dealer promotional rates) to 12%+ depending on credit score and lender. Loan terms usually range from 24 to 84 months. Longer terms lower monthly payments but significantly increase total interest paid and risk owing more than the car is worth (being 'underwater'). Banks, credit unions, dealership financing arms, and online lenders all offer auto loans. Pre-approval from your bank before visiting a dealer gives negotiating power.
Related Terms
Secured Loan
A loan backed by collateral — an asset the lender can seize if you default.
APR (Annual Percentage Rate)
The true yearly cost of borrowing, including fees and interest.
Loan Term
The length of time you agree to specific loan conditions before renewal.
Credit Score
A 3-digit number (300–900) indicating your creditworthiness to lenders.
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