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:

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

Explanation: The formula calculates the fixed payment needed to fully amortize the loan over its term, accounting for compound interest.

3. Importance of Loan Payment Calculation

Details: Understanding your monthly payment helps with budgeting and comparing different loan offers. It shows the true cost of borrowing when interest is included.

4. Using the Calculator

Tips: Enter the loan amount in CAD, annual interest rate as a percentage (e.g., 5.99), and 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, 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 to 7 years), with 60 months being very common.

Q3: How does interest rate affect payments?
A: Higher rates increase monthly payments. A 1% rate difference on a $30,000 loan can change payments by $15-$30/month depending on term.

Q4: Should I choose a longer term for lower payments?
A: While longer terms reduce monthly payments, you'll pay more interest overall. Balance affordability with total cost.

Q5: Are Canadian rates different from US rates?
A: Yes, Canadian rates are typically higher than US rates. Current rates vary by credit score, lender, and vehicle type.