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's used by Canadian banks to determine regular payments on auto loans.

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)
• \( n \) — Number of monthly payments (term in months)
• \( PMT \) — Monthly payment amount (CAD)

Explanation: The formula accounts for both principal repayment and interest charges, distributing payments evenly over the loan term.

3. Importance of Loan Payment Calculation

Details: Accurate payment calculation helps borrowers understand their financial commitments, compare loan offers, and budget effectively for vehicle purchases.

4. Using the Calculator

Tips: Enter the loan amount in CAD, annual interest rate (as percentage), and loan term in months. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Are Canadian car loan rates compounded monthly?
A: Yes, most Canadian banks compound interest monthly on auto loans.

Q2: What's a typical car loan term in Canada?
A: Terms typically range from 24 to 84 months (2-7 years), with 60 months being common.

Q3: Does this include taxes and fees?
A: No, this calculates principal and interest only. Taxes, registration, and other fees would be additional.

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

Q5: Are there prepayment penalties in Canada?
A: Some Canadian lenders charge prepayment penalties; check your loan agreement for details.