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:

• \( PMT \) — 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 accounts for compound interest over the life of the loan, ensuring each payment covers both principal and interest.

3. Importance of Accurate Payment Calculation

Details: Knowing your exact monthly payment helps with budgeting and ensures you can comfortably afford the vehicle. It also allows you to compare different loan offers effectively.

4. Using the Calculator

Tips: Enter the total loan amount in CAD, annual interest rate (without % sign), and loan term in 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, registration fees, or insurance are not included.

Q2: What's a typical interest rate in Canada?
A: Rates vary but typically range from 3% to 8% for new cars and 5% to 15% for used cars, depending on credit score and market conditions.

Q3: How does loan term affect payments?
A: Longer terms reduce monthly payments but increase total interest paid. Shorter terms have higher payments but lower total cost.

Q4: Are there prepayment penalties?
A: Some Canadian lenders charge penalties for early repayment. Check your loan agreement for details.

Q5: How accurate is this calculator?
A: It provides precise calculations for fixed-rate loans. Variable rate loans would require more complex calculations.