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.

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, with more going toward interest early in the loan term.

3. Importance of Loan Payment Calculation

Details: Understanding your monthly payment helps with budgeting and ensures the loan fits your financial situation before committing to a purchase.

4. Using the Calculator

Tips: Enter the total loan amount (after any down payment), the annual interest rate (APR), and the loan term in months (e.g., 60 for 5 years). 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 car loan term in Canada?
A: Most car loans range from 36 to 84 months (3-7 years), with 60 months (5 years) being very common.

Q3: How does a larger down payment affect payments?
A: A larger down payment reduces the principal amount (P), resulting in lower monthly payments.

Q4: Are Canadian car loan rates different from US rates?
A: Yes, Canadian rates may differ due to market conditions. Always check current rates from Canadian lenders.

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 monthly budget and total cost preferences.