Are you looking to finance the purchase of a new or pre-owned car?
You can use this car loan payment calculator to estimate how much interest you will be paying over the term of your car loan. It will also help you understand whether you can afford the required monthly payments before you approach a lender or car dealership.
How To Use The Car Loan Payment Calculator
1. Enter the price of the car (new or pre-owned). You can choose to add the sales tax as well in this section if you do not intend to pay the sales tax (i.e. PST/GST/HST) in cash.
2. Enter the cost of dealer, title, and car registration. If you will pay this in cash, you can enter $0.
3. Enter the value of your Trade-in.
4. Enter the amount of your downpayment. A higher downpayment lowers your loan amount and the total interest you will pay over time.
5. Choose a loan term by entering the number of months it will take to repay the loan.
6. Enter the interest rate.
7. Click on the “Calculate” button to see the results.
Assuming you are buying a $50,000 car and the following apply:
- Dealer and registration fees: $0
- Trade-in value: $5,000
- Down payment: $5,000
- Loan term: 60 months
- Interest rate: 5%
Using the auto loan payment calculator, you will finance $40,000 and pay $754.85 every month for 5 years (60 months). Your total interest fee is approximately $5,291.
What is a Car Loan?
A car loan or auto loan refers to money you borrow from a lender in order to purchase a vehicle.
Some key terms you should understand before taking a car loan are:
Interest rate: This is the cost of the loan, and it is calculated on an annual basis. The interest rate determines how much money you will end up paying for the car.
Downpayment: This is the money you provide upfront and out of pocket when buying a car. A larger downpayment is preferable as it lowers your monthly payment and may also help you qualify for a lower interest rate.
Trade-in value: This is the price you negotiate with a dealer for your current vehicle. The trade-in value of your car is deducted from the purchase price of the vehicle you are buying.
Loan term: This is the amount of time it will take you to pay back the car loan. It is usually expressed in months and ranges from 36 months to 84 months. You can also choose a shorter term if you can afford it.
Car Loan Lenders in Canada
Banks like RBC, TD, BMO, CIBC, and Scotiabank offer car loans.
If you are looking to shop around and compare the best car loan rates in Canada, you can use any of these platforms:
Cars Fast is a popular destination for getting a car loan regardless of your credit score. The platform has partnerships with top loan providers, including TD, Scotiabank, RBC, HSBC, and others.
Interest rate: Varies.
Loan term: 12-96 months.
Maximum loan amount: $75,000.
Eligibility: Earn at least $20,000/yr, reside in ON, BC, or AB; and be employed for 3 months+.
Loans Canada is a loan comparison platform for all kinds of personal loans, car loans, debt consolidation loans, and bad credit loans. It has partnerships with some of Canada’s largest lenders and offers free access to your Equifax credit score.
Interest rate: 1.99% to 46.96%.
Loan term: 4-60 months.
Maximum loan amount: Up to $50,000.
LoanConnect is a search engine for finding personal loans online from various lenders. You can use it to find a loan that works for your situation regardless of your credit score.
Interest rate: 6.99% to 46.9%.
Loan term: 3-120 months.
Maximum loan amount: Up to $50,000.
Best Car Loan Interest Rates in Canada
You will need a ‘good’ to ‘excellent’ credit score if you want to access low auto financing rates in Canada.
Credit score ranges are as follows:
- Excellent credit score: 760 – 900
- Very good credit score: 725 – 759
- Good credit score: 660 – 724
- Fair credit score: 560 – 659
- Poor/bad credit score: 300 – 559
You can check your credit score for free.
While it is easier to get a car loan when your credit score is 660 and higher, there are also options for bad credit car loans.
Bad credit car loans have higher interest rates.
How Do Car Loans Work?
Car loans are a special type of loan that you take out for the specific purpose of buying a car, and they can be used for new or used cars.
There are several ways to apply for a car loan, including at a dealership or a bank, which we’ll look at in the next section.
You’ll typically need to provide certain information when you apply for a car loan, including proof of income and a valid form of government-issued ID. The lender will generally check your credit score too.
To qualify, you will need to be a resident of Canada and the age of majority in the province or territory where you live.
You may be able to get pre-approved for a car loan before you buy it, and you can then choose your car, knowing, in theory, what you can afford.
Loans have different terms and interest rates, and you’ll need to compare your options.
Terms are anything from a year up to 84 months or so, and a shorter term means you pay less overall but make higher monthly payments.
The loan agreement will show how much principal and interest you owe, and you then pay back the amount in monthly installments until you’ve paid off the entire loan.
You’ll only own your vehicle when you have fully paid off your loan. However, if you default on your payments, you could lose the vehicle.
Dealership Loans vs Direct Loans
As mentioned above, you can apply for a car loan in different ways, with the two main options being dealership and direct loans.
As the name suggests, dealership loans are car loans provided by the dealership where you buy the vehicle.
They may provide several offers, and car loan interest rates from dealerships are often better than loans provided by banks.
You will normally need to provide a down payment, and one advantage is that you may be able to get a loan even if you don’t have a great credit score.
Alternatively, you may apply for a direct loan via a bank to buy a car.
These may have slightly higher interest rates, but you may not require a down payment. If you are a bank customer already, you may get even better rates, but you will normally need a good credit score.
Car Sales Tax in Canada
When you buy a car at a dealership, there is a federal Goods and Services Tax (GST) of 5%. There may also be a Provincial Sales Tax (PST), which differs by province.
Sometimes these two are combined in the Harmonized Sales Tax (HST).
Read our in-depth guide on car sales tax in Canada to learn about the different provincial taxes.
Vehicle Rebates in Canada
If you are thinking about buying an electric or hybrid vehicle, you may be able to take advantage of vehicle rebates.
There are several available, including federal and provincial programs.
For example, the Incentives for Zero-Emission Vehicles (iZEV) Program is a federal rebate available when buying an electric, plug-in hybrid, or hydrogen fuel cell vehicle with a base model MSRP of under $55,000. The rebate is worth up to $5,000.
You may find different programs available in different provinces.
How to Pay Off a Car Loan in Canada
When you take out a car loan, you’ll have monthly payments to make to cover the principal and interest on your loan.
You should know how many payments you must make and how much is due for each.
It’s important to make your payments on time. Failing to do so could hurt your credit score, but it could also result in you losing the car.
You might be able to pay it off early, but it depends on your situation and whether this makes sense for you. Check the terms because there may be an early payment penalty.
If you’re struggling to repay your loan, you might want to increase your income. Perhaps you could get a side gig to help you pay it back.
How to Budget for a Car
To budget for your car, you need to work out the car’s total cost and how much you can afford to pay as a down payment. You may need to save this if you don’t already have it.
You must then consider your loan payments if you get a loan. These monthly payments will be one of the biggest expenses you will face.
Once you have got the car, there are other costs to consider:
- Car insurance – Get quotes online to determine how much you can expect to pay.
- Gas – Work out how many kilometres you expect to drive each month, which will help you calculate the gas.
- Repairs and maintenance – These will vary, but budget about $1,000 for a small car each year. Used cars have higher maintenance costs.
Once you know the costs, work out your household budget and find out whether you have enough to cover the cost of a car.
Factors to Consider When Applying for a Car Loan
When applying for a car loan, several factors must be considered:
First, you must carefully consider your own situation and how much you can afford. Prepare a budget and know how much you can set aside to pay each month.
If you have other debts, you may want to clear them first before taking out a new loan.
Use a car payment calculator to work out how much a car loan will cost you, both in total and monthly. Compare this to how much you can afford.
Can you save up a down payment? This is not always required, but it can help to reduce the cost of the loan.
Do you have a good credit score? You may be able to get a car loan with a poor score, but the interest rate will be higher.
If you can wait a few months, try to improve your score. Use a credit building service or apply for a secured credit card and spend a small amount each month.
Try to find the best interest rate you can. A lower interest rate will make your loan less expensive.
Consider the term of the loan. Do you want to make smaller monthly payments but pay off more in total? Or would you prefer it the other way around?
Compare different lenders, including your own bank, other banks, online lenders, and dealerships. The types of loans available may differ considerably, and make sure you are clear about any fees involved.
Car Loan Payment Formula
When you get a car loan, you want to find out how much you will need to pay back, both every month and in total. You can use a car payment calculator in Canada to help you get a rough estimate.
You will need to take into account the following:
- The price of the car.
- The down payment you can provide.
- The interest rate, which you may need to estimate.
- The loan term.
- The trade-in value of your old car.
- Federal and provincial taxes.
To work out the monthly cost of the loan, use the following formula:
- (Loan amount x monthly interest rate) x ((1 + monthly interest rate) x number of payments)
Work out this figure, then divide it by:
- ((1 + monthly interest rate) x number of payments) – 1
- Bad Credit Car Loans in Ontario
- LoanConnect Review
- Car Loans Canada Review
- How To Buy a Car For The Lowest Price
- Car Maintenance Tips You Can DIY
- Car Sales Tax in Canada
- EV Rebates Available in Canada
Disclaimer: Calculation results are approximations and for information purposes only.