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 the periodic payment amount.

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 (loan term in months)
• \( PMT \) — Monthly payment amount (CAD)

Explanation: The formula accounts for both principal repayment and interest charges over the life of the loan.

3. Importance of Loan Payment Calculation

Details: Calculating your exact monthly payment helps with budgeting, comparing loan offers, and understanding the total cost of financing a vehicle in Canada.

4. Using the Calculator

Tips: Enter the principal amount in CAD, annual interest rate as a percentage (e.g., 5.99%), and loan term in months (typically 24-84 months for Canadian car loans).

5. Frequently Asked Questions (FAQ)

Q1: What is a typical car loan term in Canada?
A: Most Canadian car loans range from 36 to 84 months, with 60 months (5 years) being very common.

Q2: How do Canadian interest rates compare?
A: Canadian rates vary but typically range from 3.99% to 19.99% depending on credit score, lender, and vehicle age.

Q3: Does this include taxes and fees?
A: No, this calculates principal and interest only. Remember to budget for sales tax (GST/HST), registration, and insurance.

Q4: 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. Longer terms reduce monthly costs but increase total interest.

Q5: Are there prepayment penalties in Canada?
A: Some Canadian lenders charge prepayment penalties. Check your loan agreement before making extra payments.