Car financing is where a lot of Canadians lose money on a vehicle, not the sticker price, according to Christopher Liew, a CFP® and CFA charterholder who writes personal finance tips at Blueprint Financial. Longer terms, rolled-over balances and add-ons priced in the finance office all can end up costing you a lot. Liew walks through five financing mistakes he says he sees over and over and how to avoid each one.
Why this matters right now
Canadians are getting more cautious. Equifax Canada’s Q1 2026 report found new auto loans from manufacturer lenders fell nearly 5 per cent year over year to a three-year low, and Equifax pointed to rising insurance, maintenance, and fuel costs as the reason people are hesitating. The same report put insolvency volumes at their highest level since 2009.
Meanwhile, the Bank of Canada held its policy rate at 2.25 per cent in July for the sixth straight time. Cheaper borrowing isn’t coming to bail anyone out.
Mistake 1: Shopping by the monthly payment
You walk in thinking “I can afford $500 more a month,” and the finance office happily makes that number work by stretching the term to 84 or 96 months. The payment fits, but the total cost can be a disaster.
The Financial Consumer Agency of Canada has a clean example: a $25,000 car at 5 per cent costs $1,974 in interest over 36 months and $4,681 over 84 months. Same car, more than double the interest, and you’re still paying for it when it’s seven years old and needs new brakes.
Liew advises: decide on the total price you’re willing to pay before you talk about payments; then pick the shortest term you can handle. If the payment doesn’t fit, the answer is often a cheaper car, not a longer loan.
Your car payment as a share of take-home pay is one of the numbers that quietly decide your savings rate, Liew notes.
Mistake 2: Rolling your old loan into the new one
When you owe more on your current car than it’s worth—often because you stretched out the term or rolled in a previous balance—dealers may offer to “bury” that negative equity into your new loan. Liew says this simply adds old debt to new debt, leaving you owing more than the new car is worth from day one.
Instead, pay down the existing loan before trading in, or wait until you’re no longer upside down. If that’s not possible, consider keeping your current car longer.
Mistake 3: Taking dealer financing without comparing
Ontario’s dealer regulator has warned that most dealers earn a commission from the lender they place you with and that some steer buyers toward the loan that pays the dealer more rather than the one that’s best for the buyer. Liew advises getting pre-approved from a bank or credit union first, then comparing the dealer’s offer. A lower rate may be available elsewhere, even if the dealer advertises a special.
Mistake 4: Financing add-ons
Extended warranties, rust protection, paint protection, and other extras are often pushed in the finance office. Liew points out that when these are rolled into the loan, you pay interest on them for the entire term. Many add-ons are overpriced and can often be bought later, or skipped entirely.
Ask for the price of the car alone, without any extras, and then decide separately whether an add-on is worth paying cash for—or at all.
Mistake 5: Signing and never looking again
Once you sign, many people never review their loan documents again. The Financial Consumer Agency of Canada notes there’s generally no cooling-off period on car loans in most provinces, meaning you can’t simply change your mind the next day. Liew urges you to read every line of the contract before signing, check the interest rate, the term, the total cost, and any fees. And after you drive off, keep an eye on your loan statements to catch any errors or unauthorized charges.
Bottom line
Car financing is where a lot of Canadians lose money on a vehicle, not the sticker price, Liew says. By avoiding these five mistakes—shopping by payment, rolling old debt, taking dealer financing without comparison, financing add-ons, and ignoring the contract—you can keep more of your money and avoid the worst kind of debt.