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 to determine the regular payment amount.

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 needed to fully amortize the loan over its term, accounting for compound interest.

3. Importance of Loan Payment Calculation

Details: Understanding your monthly payment helps with budgeting and ensures the loan terms are affordable. It also allows comparison between different loan offers.

4. Using the Calculator

Tips: Enter the total 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: Does this include taxes and fees?
A: No, this calculates only the principal and interest portion. Additional costs like sales tax, registration, or documentation fees are not included.

Q2: What's 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.

Q3: How does down payment affect the calculation?
A: Subtract your down payment from the vehicle price to determine the principal amount (P) to enter in the calculator.

Q4: Are Canadian auto loan rates compounded monthly?
A: Yes, Canadian auto loans typically use monthly compounding, which this calculator accounts for.

Q5: What's better - shorter term with higher payments or longer term with lower payments?
A: Shorter terms mean less total interest paid but higher monthly payments. Choose based on your budget and how long you plan to keep the vehicle.