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 regular payment amount.

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)
• \( n \) — Total number of payments (term in years × 12)

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

3. Importance of Loan Calculation

Details: Understanding your monthly payment helps with budgeting and ensures the loan terms are affordable. It also allows comparison between different loan offers.

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 years (typically 3-7 years for car loans).

5. Frequently Asked Questions (FAQ)

Q1: What is a typical car loan term in Canada?
A: Most car loans in Canada range from 3 to 7 years, with 5 years being the most common term.

Q2: What interest rates can I expect?
A: Rates vary but typically range from 3% to 8% for new cars and 5% to 15% for used cars, depending on credit score.

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

Q4: What's better - shorter or longer loan term?
A: Shorter terms mean higher payments but less total interest. Longer terms have lower payments but cost more overall.

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