Detailed Car Loan Calculator Canada

Amortization Formulas:

\[ \text{Interest}_k = \text{Balance}_{k-1} \times r \] \[ \text{Principal}_k = \text{PMT} - \text{Interest}_k \] \[ \text{Balance}_k = \text{Balance}_{k-1} - \text{Principal}_k \]

Loan Amount:

CAD

Annual Interest Rate:

Loan Term:

years

Payment Frequency:

Payment Amount:

Total Interest:

Total Cost:

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1. What is a Car Loan Amortization?

A car loan amortization schedule shows how each payment is split between principal and interest over the life of your loan. In Canada, most car loans are amortized with fixed payments where the interest portion decreases while the principal portion increases with each payment.

2. How Does the Calculator Work?

The calculator uses standard amortization formulas:

\[ \text{Interest}_k = \text{Balance}_{k-1} \times r \] \[ \text{Principal}_k = \text{PMT} - \text{Interest}_k \] \[ \text{Balance}_k = \text{Balance}_{k-1} - \text{Principal}_k \]

Where:

\( \text{Interest}_k \) — Interest portion of payment k (CAD)
\( \text{Principal}_k \) — Principal portion of payment k (CAD)
\( \text{Balance}_k \) — Remaining balance after payment k (CAD)
\( r \) — Periodic interest rate (decimal)
\( \text{PMT} \) — Fixed payment amount (CAD)

Explanation: The calculator first determines your fixed payment amount, then breaks down how each payment affects your loan balance over time.

3. Understanding Your Amortization Schedule

Details: In the early years of your car loan, most of your payment goes toward interest. As you pay down the principal, more of each payment goes toward reducing your balance.

4. Using the Calculator

Tips: Enter your loan amount in CAD, annual interest rate (without % sign), loan term in years, and select your payment frequency. The calculator will show your payment amount and generate a detailed schedule.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between monthly and bi-weekly payments?
A: Bi-weekly payments (every 2 weeks) result in 26 payments per year, equivalent to 13 monthly payments. This can help pay off your loan faster and save on interest.

Q2: How does interest work on Canadian car loans?
A: Most Canadian car loans use fixed interest rates with compound interest calculated on the remaining balance at each payment period.

Q3: Can I make extra payments on my car loan?
A: Many Canadian lenders allow extra payments, but some may have prepayment penalties. Check your loan agreement.

Q4: What affects my car loan interest rate?
A: Rates depend on your credit score, loan term, vehicle age, and current Bank of Canada rates.

Q5: Should I get a longer loan term for lower payments?
A: While longer terms reduce payments, you'll pay more interest overall and may be "upside-down" on your loan (owing more than the car's value) for longer.