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Key takeaways
- No lender in Canada can charge more than 35% APR, including most fees.
- Before you sign, you must get written disclosure of the APR and the total cost of borrowing.
- Car dealers must be licensed in most provinces and follow advertising rules.
- Repossession rules vary a lot by province. Some require a court order or stop lenders from suing you for the balance.
- There’s generally no cooling-off period after you sign a car contract.
This guide is general information, not legal advice. Laws change and depend on your situation. For a specific problem, contact your provincial consumer protection office or a lawyer.
Who regulates car financing in Canada?
Car financing is regulated by both levels of government:
Ottawa
Sets the criminal interest rate in the Criminal Code and regulates federally chartered banks through the Financial Consumer Agency of Canada (FCAC).
Provinces & territories
Set consumer protection, cost of credit disclosure, dealer licensing, repossession and lease rules. They also regulate credit unions and non-bank lenders.
Most car loans arranged at a dealership are made by banks, credit unions or finance companies, so your protections usually come from both federal and provincial law.
The 35% interest rate cap
Section 347 of the Criminal Code makes it a crime to charge interest above the criminal interest rate. Since January 1, 2025, that limit is 35% APR, down from the old 47% effective annual rate.
- Fees count. “Interest” includes almost every charge for the credit: fees, commissions, penalties and bonuses, not just the stated rate.
- It covers every type of lender, including dealers’ finance partners, subprime lenders and car title lenders, with limited exceptions such as some commercial loans.
- Provinces can add more. Several provinces require lenders that charge high rates (often above 32% APR) to be licensed and to follow extra disclosure rules.
If your contract’s APR is over 35%, contact your provincial consumer protection office. See what different rates mean for your payment with our car loan calculator.
What lenders must tell you before you sign
Provincial cost of credit rules, and federal rules for banks, require clear written disclosure before you enter a credit agreement, including:
- The annual percentage rate (APR), which includes most non-interest charges
- The total cost of borrowing in dollars over the life of the loan
- The amount financed, the term, and the number and amount of payments
- Every fee and optional product (like credit insurance or warranties) added to the loan
- Your rights to prepay and any charges for late or missed payments
In most provinces you can pay off a consumer car loan early, in full or in part, without a penalty. Ask for the disclosure statement and read it before you sign. Don’t sign a contract with blank spaces.
Dealer licensing and advertising rules
Most provinces require anyone in the business of selling vehicles to be licensed or registered, and give you somewhere to go if something goes wrong. Examples:
| Province | Dealer regulator | Worth knowing |
|---|---|---|
| Ontario | OMVIC | All-in price advertising: the advertised price must include every fee except HST and licensing. Compensation fund for eligible consumer claims. |
| Alberta | AMVIC | Licenses dealers and salespeople, and investigates consumer complaints. |
| British Columbia | Vehicle Sales Authority of B.C. | Licenses dealers and salespeople. Compensation fund for eligible claims. |
| Quebec | Office de la protection du consommateur | Licenses dealers and enforces Quebec’s Consumer Protection Act, which has some of Canada’s strongest credit and lease rules. |
| Other provinces & territories | Consumer affairs office | Rules vary. Check that the dealer is licensed or registered where your province requires it. |
Be wary of curbsiders: unlicensed sellers who pose as private sellers. Buying from them means you lose dealer protections. Our guide to where to buy a car covers how to spot them.
Repossession rules by province
If you default on your car loan, the lender can usually repossess the vehicle, but only within the rules of your province. Across Canada, personal property security laws generally:
- require the lender to give you written notice before selling a repossessed vehicle
- let you get the car back before the sale by paying the overdue amount (or the balance) plus reasonable costs
- require the vehicle to be sold in a commercially reasonable way, with any surplus paid to you
Some provinces go further:
| Province | Extra protection |
|---|---|
| Ontario | Once you’ve paid two-thirds or more of the amount owing under a consumer agreement, the lender needs a court order to repossess. |
| Quebec | The lender must send a notice and give you time to fix the default. If you’ve paid at least half, it needs court permission to take the vehicle back. |
| British Columbia, Alberta, Saskatchewan, Newfoundland and Labrador | “Seize or sue” rules: for many consumer purchase loans, the lender generally has to choose between repossessing the vehicle and suing you for the debt. If it repossesses, it usually can’t also come after you for the shortfall. |
| Other provinces & territories | The lender can usually repossess, sell the car, and then sue for any shortfall (the “deficiency”) plus costs. |
These rules have exceptions, for example for business vehicles or refinanced loans. If you’re behind on payments, call your lender early. Many will agree to a deferral or a new payment plan rather than repossess. Non-profit credit counsellors can help too.
Car leasing rules
A lease is a long-term rental, not a loan, but provinces regulate consumer leases too. Before you sign, the lessor must disclose key terms, typically:
- The vehicle’s value (capitalized cost), down payment and trade-in credit
- The residual value and whether you can buy the car at the end, and for how much
- The implicit interest rate and the total of your lease payments
- Kilometre limits and the excess kilometre charge
- How excess wear and tear is assessed
- What it costs to end the lease early
Closed-end lease
- The usual consumer lease
- The car’s value at the end is the leasing company’s risk
- You pay only for extra kilometres, extra wear and agreed fees
Open-end lease
- More common for business use
- If the car is worth less than the residual at the end, you pay the difference
- Riskier for consumers. Avoid it unless you understand the exposure
Defects, lemons and recalls
- No U.S.-style lemon law. The Canadian Motor Vehicle Arbitration Plan (CAMVAP) offers free, binding arbitration with the manufacturer over defects in newer vehicles. The manufacturer can be ordered to repair the vehicle, reimburse you, or buy it back.
- Recalls are free. Under federal vehicle safety law, manufacturers must notify owners of safety recalls, and brand dealers fix them at no charge. Check a VIN in Transport Canada’s recall database before you buy.
- Sale of goods and consumer protection laws in each province may give you rights if a vehicle isn’t what the seller said it was.
How to make a complaint
-
Go to the business first
Put your complaint in writing to the dealer or lender. Keep copies of your contract, disclosure statements and messages.
-
Escalate to the regulator
For dealers, contact your province’s dealer regulator or consumer protection office. For a federally regulated bank, contact the bank’s complaints office, then the FCAC or the bank’s external complaints body.
-
Consider arbitration or court
CAMVAP handles manufacturer defect disputes. Small claims court is an option for many money disputes, and you don’t need a lawyer.
Car financing laws FAQ
What is the maximum interest rate on a car loan in Canada?
35% APR. The federal criminal interest rate was lowered from 47% effective annual rate to 35% APR on January 1, 2025. It applies to car loans and counts most fees and charges as interest.
Is there a cooling-off period when you buy or lease a car?
Generally, no. Most provinces don’t give you an automatic right to cancel a car purchase or lease after you sign, so read everything carefully before you do. Some dealers offer their own return or exchange policies. Make sure any promise is written into your contract.
Can I pay off my car loan early?
In most provinces, consumer protection laws let you pay off a consumer car loan early, in full or in part, without a penalty. Leases are different: ending a lease early usually comes with significant costs, so check your agreement.
Can my car be repossessed without warning?
A lender can repossess once you’re in default under your contract, but provincial laws set the rules. Usually the lender must give written notice before selling the vehicle, and you can get it back by paying what’s owed plus costs. In some provinces a court order is needed once you’ve paid a large part of the loan.
Does Canada have a lemon law?
Not in the U.S. sense. Instead, the Canadian Motor Vehicle Arbitration Plan (CAMVAP) offers free arbitration for disputes with manufacturers over defects in newer vehicles. Provincial sale of goods and consumer protection laws may also help.
Who do I complain to about a car dealer?
Start with the dealer. If that doesn’t work, contact your province’s dealer regulator or consumer protection office. In Ontario that’s OMVIC, in Alberta AMVIC, in B.C. the Vehicle Sales Authority, and in Quebec the Office de la protection du consommateur.
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