Variable Rate Financing

Variable rate financing refers to a car loan or lease where the interest rate can fluctuate over time, usually in relation to the lender’s prime rate. While most Canadian auto loans are fixed-rate, some banks and credit unions offer variable rate options. With a variable rate loan, if interest rates rise, the borrower’s rate and possibly payment can increase (and vice versa if rates fall). Dealerships must ensure customers choosing a variable rate understand this risk. In practice, variable auto loans are less common than fixed in Canada, but when used, they might attract customers with initially lower rates and the potential to pay less interest if market rates stay low.