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 pay off the loan with interest over the specified term, with each payment containing both principal and interest components.

3. Importance of Loan Payment Calculation

Details: Understanding your monthly car 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 interest rate in Ontario?
A: Rates vary but typically range from 3.99% to 9.99% depending on credit score, loan term, and lender.

Q2: Does this include Ontario sales tax?
A: No, this calculates the base payment. Remember to account for 13% HST on the purchase price in Ontario.

Q3: What is the maximum car loan term in Canada?
A: Most lenders offer terms up to 8 years, though shorter terms (3-5 years) are generally recommended.

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

Q5: How does down payment affect the calculation?
A: A down payment reduces the principal amount (P) in the formula, lowering your monthly payments.