If you’re living in Canada and struggling with a poor credit score, purchasing a vehicle might seem like a distant dream—but it doesn’t have to be. In 2025, there are more opportunities than ever to secure a car loan, even with bad credit. The key is knowing your options, understanding how lenders assess risk, and taking the right steps to set yourself up for success.
This guide will walk you through how to buy a car with bad credit in Canada, what to expect during the loan process, and how to improve your financial standing along the way.
What Does “Bad Credit” Really Mean?
In Canada, credit scores range from 300 to 900, and a score below 660 is generally considered subprime or “bad credit.” This might be due to missed payments, high credit usage, a history of defaults, or simply limited credit history (especially common for newcomers to Canada).
Lenders use your credit score to determine how risky it is to lend you money. While a lower score can limit your financing options or increase your interest rate, it doesn’t automatically disqualify you from buying a car.
Can You Get a Car Loan with Bad Credit?
Yes, you absolutely can. In fact, many Canadian lenders—including major banks, credit unions, and specialized finance companies—offer bad credit car loans designed to help individuals with less-than-perfect credit secure a vehicle.
These loans often come with:
- Slightly higher interest rates
- Stricter income verification
- More documentation requirements
However, they are a legitimate path to vehicle ownership and credit rebuilding when managed responsibly.
Steps to Buying a Car with Bad Credit
1. Know Your Credit Score First
Start by checking your credit score and reviewing your credit report. You can do this for free using trusted platforms like Borrowell or Equifax Canada. Understanding where you stand helps you prepare for lender questions and assess what interest rates you might qualify for.
2. Determine Your Budget
Figure out how much you can afford, not just for the car itself but for monthly payments, insurance, fuel, and maintenance. Most experts suggest that your car expenses should be no more than 10%–15% of your monthly income.
3. Get Pre-Approved
Before you start shopping, consider applying for pre-approval from a lender that specializes in bad credit auto loans. This will give you a clear picture of your maximum loan amount and allow you to negotiate with confidence.
4. Make a Down Payment
While not always mandatory, putting money down reduces the size of your loan, lowers your monthly payments, and may qualify you for better rates. Even $1,000 to $2,000 can make a meaningful difference.
5. Choose the Right Vehicle
Look for a reliable, fuel-efficient, and affordable used car. Avoid luxury vehicles or high-performance models that increase risk and cost. Lenders are more likely to approve financing for modest, practical cars.
6. Apply with the Right Lender
Not all lenders treat bad credit applicants the same. Choose a dealership or broker that specializes in subprime financing and has access to multiple lenders. They can match your application with the best fit.
Benefits of Getting a Car Loan with Bad Credit
- Rebuild Your Credit: Timely payments are reported to credit bureaus and help improve your score over time.
- Regain Independence: A vehicle opens doors to new employment opportunities and personal freedom.
- Flexible Terms: Many lenders now offer bad credit car loans with customizable payment plans and early payoff options.
What to Watch Out For
While there are many legitimate options, be cautious of:
- Predatory lenders offering sky-high interest rates
- Buy Here, Pay Here dealers that don’t report to credit bureaus
- Long loan terms (72+ months) that lead to more interest paid over time
Always read the fine print and understand your total loan cost before signing anything.
Final Thoughts: Yes, You Can Drive Away—Even with Bad Credit
Buying a car with bad credit in Canada in 2025 is not only possible—it’s achievable with the right plan. With responsible budgeting, the right lender, and a realistic vehicle choice, you can drive away and rebuild your credit at the same time.
Need help getting started? At Canada Bad Credit Loan, we specialize in helping Canadians secure car loans, regardless of their financial history. Apply online today and let us help you get back on the road.