New vs. Used Car Financing:
What's the Difference?
Rates, terms, and lender rules change significantly depending on whether you're buying new or used. Here's how to make the right call for your situation.
How Financing Differs: New vs. Used
These four factors shift meaningfully between new and used vehicle financing in Canada.
Interest Rates
New vehicles often qualify for lower rates, sometimes as low as 0% through manufacturer financing. Banks also offer competitive rates on new cars.
Used car rates are typically 1–4% higher than equivalent new car rates. The older and higher-mileage the vehicle, the higher the lender's risk — and your rate.
Loan Terms Available
New vehicles can typically be financed for up to 96 months. Longer terms lower your monthly payment but increase total interest paid.
Lenders often cap used car loan terms at 72 months, and sometimes less for older vehicles. This means higher monthly payments than new for the same vehicle price.
Depreciation
New vehicles lose 20–30% of their value in year one. You may be underwater on the loan for the first 2–3 years.
Previous owners absorbed the steepest depreciation. The vehicle you buy has already taken the biggest hit in value.
Warranty Coverage
Factory warranties typically cover 3 years/60,000 km bumper to bumper and 5 years/100,000 km powertrain — providing predictable ownership costs.
Manufacturer warranty may be expired or have limited remaining coverage. Extended warranties are available but add cost.
Which Is Right for You?
New Vehicle
Best if you want predictability
- Full factory warranty included
- Latest safety technology
- Access to manufacturer incentive rates
- Easier approval for first-time buyers
- Higher sticker price, steeper first-year depreciation
Used Vehicle
Best if you want value
- Lower purchase price — more car per dollar
- Previous owners absorbed peak depreciation
- Lower insurance premiums in most cases
- Slightly higher interest rate than new
- More due diligence required (history report, inspection)
Common Questions
New or Used — We Work with Both
Motofi connects you with lenders for both new and used vehicles across Canada. One application, 30+ lenders competing for your business.