1. What is a Car Loan Amortization?

A car loan amortization schedule shows how each payment is split between principal and interest over the life of the loan. In Canada, this helps borrowers understand how much they're paying in interest versus reducing the principal balance.

2. How Does the Calculator Work?

The calculator uses standard amortization formulas:

Where:

• \( Interest_k \) — Interest portion of payment k (CAD)
• \( Principal_k \) — Principal portion of payment k (CAD)
• \( Balance_k \) — Remaining balance after payment k (CAD)
• \( r \) — Periodic interest rate (decimal)
• \( PMT \) — Fixed periodic payment amount (CAD)

Explanation: Early payments have higher interest portions, while later payments have higher principal portions.

3. Importance of Amortization Schedule

Details: Understanding your amortization schedule helps you see the true cost of borrowing and plan for potential early payments or refinancing.

4. Using the Calculator

Tips: Enter the loan amount in CAD, annual interest rate as a percentage, loan term in years, and select your payment frequency (monthly, bi-weekly, or weekly).

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between monthly and bi-weekly payments?
A: Bi-weekly payments (26 per year) can save interest and pay off the loan faster than monthly (12 per year) because you make one extra monthly payment each year.

Q2: How does interest work on Canadian car loans?
A: Canadian car loans typically use simple interest calculated on the declining balance, not compound interest.

Q3: Can I make extra payments to save on interest?
A: Yes, most Canadian lenders allow extra payments which go directly to principal, reducing total interest paid.

Q4: What's a typical car loan term in Canada?
A: Terms typically range from 3-7 years, with 5 years being most common. Longer terms mean lower payments but more total interest.

Q5: Are there prepayment penalties in Canada?
A: Some lenders charge penalties for paying off early. Check your loan agreement for details.