1. What is the Auto Loan Payment Formula?

The auto loan payment formula calculates the fixed monthly payment required to repay a car loan over a specified term. It accounts for the principal amount, interest rate, and loan duration.

2. How Does the Calculator Work?

The calculator uses the standard loan payment formula:

Where:

• \( PMT \) — Monthly payment (CAD)
• \( P \) — Principal loan amount (CAD)
• \( r \) — Monthly interest rate (annual rate ÷ 12)
• \( n \) — Number of monthly payments (term in months)

Explanation: The formula calculates the fixed payment that covers both principal and interest each month, ensuring the loan is paid off by the end of the term.

3. Importance of Loan Payment Calculation

Details: Calculating your monthly payment helps with budgeting and comparing loan offers. It shows how much car you can afford and the impact of different interest rates and terms.

4. Using the Calculator

Tips: Enter the loan amount in CAD, annual interest rate (without % sign), and loan term in months. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What is a typical auto loan term in Canada?
A: Most auto loans in Canada range from 36 to 84 months (3-7 years), with 60 months being very common.

Q2: What interest rates can I expect in Canada?
A: Rates vary but typically range from 3% to 8% for new cars and 5% to 15% for used cars, depending on credit score.

Q3: Does this include taxes and fees?
A: No, this calculates only the principal and interest portion. Additional costs like sales tax, registration, and insurance are separate.

Q4: How does a larger down payment affect the payment?
A: A larger down payment reduces the principal (P), resulting in a lower monthly payment.

Q5: Are there prepayment penalties in Canada?
A: Some lenders charge prepayment penalties, especially in the early years of the loan. Check your loan agreement.