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Loan Affordability Formula:
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The car loan affordability formula calculates the maximum loan amount you can afford based on your desired monthly payment, interest rate, and loan term. This helps you determine your budget before car shopping.
The calculator uses the loan affordability formula:
Where:
Explanation: The formula calculates the present value of a series of future payments at a given interest rate, showing how much loan principal those payments can support.
Details: Knowing your affordable loan amount helps you shop for vehicles within your budget and prevents overextending your finances. RBC recommends keeping total vehicle expenses below 15-20% of your monthly income.
Tips: Enter your comfortable monthly payment, current RBC car loan interest rate, and desired loan term (typically 24-84 months). All values must be positive numbers.
Q1: What is a typical RBC car loan interest rate?
A: Rates vary (3.9%-8.9% as of 2023) based on credit score, loan term, and vehicle age. Check RBC's current rates for accurate calculations.
Q2: Should I include insurance in my monthly payment?
A: No, this calculator only considers loan payments. Budget separately for insurance, maintenance, and fuel.
Q3: What loan term should I choose?
A: Shorter terms (36-48 months) mean higher payments but less interest paid overall. Longer terms (60-84 months) lower payments but increase total interest.
Q4: Does this include taxes and fees?
A: No, the calculated amount is just the principal. Add 10-15% for taxes, registration, and dealer fees to get your total vehicle budget.
Q5: How does down payment affect this calculation?
A: The result shows the loan amount. Add your planned down payment to determine your total vehicle purchase price.