1. What is the Car Loan Payment Formula?

The car 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 your regular payments.

2. How Does the Calculator Work?

The calculator uses the standard loan payment formula:

Where:

• \( P \) — Principal loan amount (CAD)
• \( r \) — Monthly interest rate (annual rate ÷ 12 ÷ 100)
• \( n \) — Number of monthly payments
• \( PMT \) — Monthly payment amount (CAD)

Explanation: The formula accounts for compound interest over the life of the loan, spreading payments evenly across the term.

3. Importance of Loan Payment Calculation

Details: Calculating your exact monthly payment helps with budgeting and comparing different loan offers. It ensures you understand the full cost of financing a vehicle in Canada.

4. Using the Calculator

Tips: Enter the total loan amount in CAD, the annual interest rate (without % sign), and the 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, documentation fees, or insurance are not included.

Q2: What's a typical car loan term in Canada?
A: Most car loans range from 36 to 84 months (3-7 years), with 60 months being very common.

Q3: How does interest rate affect payments?
A: Higher rates significantly increase total cost. A 2% difference on a $30,000 loan can mean thousands more in interest over the term.

Q4: Should I choose a longer term for lower payments?
A: While longer terms reduce monthly payments, you'll pay more interest overall. The shortest term you can afford is usually best.

Q5: Are Canadian car loans different from US?
A: The calculation is the same, but Canadian loans may have different terms, rates, and regulations. Always check local lending practices.