Planning Your Next Vehicle Purchase?
If you’re planning to finance your next vehicle purchase using a loan, it’s important to have a good understanding of what your payments will be. This way you’ll be able to create a monthly budget that works for your lifestyle.
Our car loan calculator can help you determine what payments you can expect to pay based on a variety of factors.
How To Use A Car Loan Calculator To Calculate Your Car Loan Payments
Using a car loan calculator is the easiest and quickest way to find out how much auto financing will cost you. Simply plug in a few figures, and the car loan calculator will instantly produce your results.
To use Loans Canada’s car loan calculator, follow these steps:
Step 1: Select your current credit score. Your credit score is used to estimate the interest rate you may qualify for. Choose from the following:
- Poor
- Average
- Good
- Great
- Excellent
Step 2: Choose your loan term.
Step 3: Input your down payment amount. This amount will be subtracted from your purchase price, leaving you with the loan amount.
Step 4: Input the purchase price of the vehicle.
Step 5: Once you’ve entered all the required information, simply click the “Calculate” button. The payment details of your car loan will be provided, including the following:
- Number of payments. This figure represents the number of loan payments you’ll make until your loan is fully repaid.
- Monthly payment. This is the amount you must pay each month until the loan is fully repaid. This amount includes the principal and interest portions.
- Total interest. This is the total amount of interest that you will pay over the life of the loan, which is added on top of your original loan amount. Your total interest represents how much your car loan costs. Generally speaking, the longer the loan term, the higher the total interest will be.
- Total payment. This amount includes all loan payments plus interest (and fees if applicable).
Step 6. If you find the payments calculated affordable, you can click the “see if you qualify” button” to quickly get pre-approved for a loan.
See How Much You Qualify For
How Does The Car Loan Calculator Calculate Your Payments?
Using a car loan calculator is the easiest way to find out your monthly payments, total interest, and total payment. However, you can also manually calculate your car loan payments using a specific formula, which is what an online car loan calculator uses:
Monthly Car Loan Payment Formula
[(Loan amount) (r) (1+r) n ]÷[(1 + r)n – 1]
r = Monthly interest rate (annual interest rate ÷ 12)
n = Number of payments (term length in months)
Car Loan Repayment Plans
A car loan is a type of financing that you can apply for through select lenders and dealerships across Canada. This financing exists to make a new or used vehicle more affordable over time through recurring payments with interest.
Depending on the policies of the lender you apply with, what kind of vehicle you’re looking at, and how strong your finances are, this payment plan can last several years and, when necessary, be adjusted to suit your needs.
Generally, the majority of lenders and dealerships can offer you various payment frequency options, such as:
- Monthly (total payments per year = 12)
- Semi-monthly (total payments per year = 24)
- Weekly (total payments per year = 52)
- Bi-weekly (total payments per year = 26)
Although the length, frequency, and overall cost of your plan will be arranged in advance, many lenders will also permit you to make accelerated payments so that you can pay down your debt faster through larger or more frequent installments. Just make sure you read your contract, as some lenders will charge a prepayment penalty.
Calculate Your Car Loan Payments With A Car Loan Calculator
To illustrate how much your car loan payments would be, let’s use a few different payment schedules based on the following car loan:
- Vehicle purchase price: $10,000
- Down payment: $2,000
- Interest rate: 15% (good credit score)
| Monthly Payment Term | Car Payment Amount | Total Payment | Total Interest Paid |
| 24 | $387.89 | $9,309.44 | $1,309.44 |
| 48 | $222.65 | $10,687.01 | $2,687.01 |
| 60 | $190.32 | $11,419.17 | $3,419.17 |
What’s The Average Car Loan Interest Rate?
Currently, the average car loan interest rate in Canada is 8.13%, according to Statistics Canada. That’s 1.15% higher than the same time last year, and more than double what the rate was three years ago, as rates for car loans have steadily increased.
Considering the higher cost of borrowing when financing a vehicle purchase, it’s important to budget accordingly. It may be worth buying a less expensive vehicle to offset the higher car loan interest rates to keep your monthly loan payments in check.
Do Car Loan Calculators Included Car Sales Tax?
When you finance a car purchase, you will likely include the sales tax. That means you’re essentially financing the sales tax as well as the purchase price of the vehicle unless you pay it upfront.
Many online car loan calculators include sales tax in their calculations. These tools will include a separate field where you can choose the sales tax rate in your province. Otherwise, you can add the sales tax amount to the purchase price amount on your own if the calculator you’re using does not have a separate sales tax field.
It should be noted that each province has its own sales tax rate. Provincial sales tax rates on vehicle purchases range from 5% to 20%. All provinces require a 5% goods and services (GST) tax rate to be applied to vehicle purchases. Some may also have a provincial sales tax (PST), and others may have a harmonized sales tax (HST), which is a combination of GST and PST.
Interestingly, BC’s car sales tax rate is based on the vehicle’s purchase price and ranges from 7% to 20% for cars. The more expensive the car, the higher the sales tax rate.
Car Loan Options In Canada
As mentioned, there are many sources of car loans that you can choose from in Canada. Just like the car loan itself, the lender you select can have a huge impact on your financial status. If you’re looking for the best rates, vehicles, and loan conditions, it’s essential to do prior research and compare lenders in your area.
Prime Lenders
If you have strong finances, you might want to apply with a prime lender, such as a bank or credit union. Under the appropriate circumstances, prime sources will usually offer a broader selection of loan products, better rates and payment plans, and more financing.
Then again, the average prime lender can be tough to qualify with, as a car loan requires a fair amount of financing and implies a significant risk for them. To strengthen your application, it may even be a smart idea to offer some form of loan security, such as collateral or a cosigner.
Alternative Lenders
If you have lower financial strength, bad credit, and no or little money to offer as a down payment. It may be easier to apply with an alternative lender, where approval standards are less strict. This may be a private company or even one that deals specifically with bad credit clients.
Either way, your approval chances and the rate you qualify for will rely more heavily on your income and overall financial health. As long as you’ve had a steady job for at least a few months and are earning a sufficient wage or salary to cover your upcoming payments, there shouldn’t be a problem.
Even borrowers who have recently been discharged from a consumer proposal or bankruptcy can qualify with select alternative lenders.
That said, since they are taking on clients who technically have a higher risk of default, many subprime lenders charge higher rates. If you are going to apply with a subprime source, make sure to factor their more substantial costs into your budget.
Dealerships
Many first and second-hand car dealerships offer financing packages. Though the conditions of your loan will once again vary depending on where you apply and what your finances look like, applying directly through a dealership can come with certain perks, such as warranties and in-house repairs.
You may even be able to bargain with your sales representative or trade in your current vehicle for a reduced price.
Nonetheless, a dealership must be treated like any other lender. Not only is it better to apply with good financial health, but it’s also crucial to compare several dealers so that you end up with a reputable source of financing, rates, and reliable vehicles.
The Importance Of Your Credit Score
Your credit score ranges from 300-900 and represents your strength as a credit user, so many lenders will use it during their approval process when you apply for a vehicle loan. If you’re approved, your score will fluctuate according to your payment behaviour until the day that you pay off your final balance.
Good Credit
More often than not, lenders prefer you to have a score in the 650-900 range because it means you have ‘good credit’ and a better chance of making payments as agreed. As a result, you can secure a larger loan with a lower rate and a more adjustable financing plan. Afterward, any payments you complete will further increase your score and make you more creditworthy in the process.
Bad Credit
However, if you miss a payment or default in some other way, the opposite will occur. Whatever the reason, enough defaulted payments can drop your score into the ‘bad credit’ range of 300-600. Once you’re here, you may only be able to access a small loan through a subprime lender, which would come with a higher rate and less negotiation power during your payment plan.
Essentially, if you‘re looking for more favourable car loan conditions when applying, it’s best to enter the application process with a credit score in the moderate to good range (anywhere above 600).
Budgeting And Affordability
No matter where you apply, keep in mind that a car loan is a significant responsibility. While most lenders can simply adjust your plan with prior discussion, there will not be much leeway if you tend to default on your payments.
Defaulting on multiple payments won’t just harm your finances and credit, it could even result in your vehicle being repossessed. So, it’s once again important to prepare yourself financially. This way, you’ll have a better chance of securing a favourable loan at a low rate and affording all the associated costs.
Car Loan Hidden Costs
Car loans, like all credit products, may include a few costs that range beyond your initial payments and interest rate. This is why it’s good to get a proper price quote from your lender before you apply. When selecting a lender, you can also request all these costs in writing and factor them into your budget.
For example, although a dealership warranty can be a smart thing to purchase, some packages will largely increase the overall price of your vehicle.
Other costs that may be hidden or you may not consider include but aren’t limited to:
- Fuel, maintenance & repairs
- Licensing & registration fees
- Loan origination & administration fees
- Taxes (HST, GST, PST)
- Insurance
- Prepayment penalty (possible)
The Right Time To Get A Car Loan
While it’s tempting to jump into the first car that catches your eye. Remember that your payments can be very difficult to manage if you’re not ready for them. There is a right and a wrong time to apply and it’s essential to know which is which.
Only consider applying for a car loan after you have:
- Researched the vehicle you’re looking to finance. Have seen what various makes and models are going for, as well as how much they will cost to finance and how much value they could lose over time.
- Compare lenders and dealerships in your area to find a reputable source of financing. They should have a good reputation with customers, offer reasonable rates, and possess valid business credentials.
- Get a proper, affordable price quote. All legitimate lenders/dealerships should be willing to answer any questions you have concerning their fees/rates and must display those costs within their contracts.
- Created a budget, cut down on unnecessary costs, and saved up an emergency fund. Some vehicles take years to finance, so be sure you can afford all costs throughout your payment plan.
- Saved for an appropriate down payment. Although a down payment isn’t always necessary, a sizeable one can reduce the length of your debt and make you more qualified for a favourable loan.
- Had the vehicle inspected by a mechanic. Though this may require a deposit, it will be worth it to avoid buying something unreliable or unsafe.
Looking For The Best Car Loan?
If you’re trying to finance the right vehicle, there’s no better place to go than Loans Canada. All you have to do is check out our car loan calculator above and contact us today to get driving!
Car Loan FAQs
How does interest work on a car loan?
Do car loans need a down payment?
Can I pay off my car loan early?
What is the minimum credit score needed for a car loan?
Glossary
| TERM | DEFINITION |
|---|---|
| Add-Ons | Any features or services that are applied on top of the base price of a car are considered add-ons. These can include things such as tinted windows, heated seats, leather seats, alarms, and wheel locks, to name a few. |
| Base Price | The base price of a car is the cost of the vehicle without any upgrades or added features that can be added after the car is ordered from a dealership. Only standard equipment and the manufacturer’s warranty are included in the base price, but any other fees will be added afterward. |
| Certified Pre-Owned (CPO) | CPO cars refer to used cars that have been certified, either by the dealership selling the car or the manufacturer of the vehicle. This gives consumers confidence knowing they are buying a used vehicle that is in good condition. When a used car is obtained by a dealership, it is inspected by a certified mechanic. The car is then repaired if it meets the required standards and is then ready to be sold as a CPO vehicle. |
| Clear Title | A clear title means that the owner of the car has a free and clear title and no longer carries a balance owing on a car loan. There are no liens of the title or levies from creditors. |
| Dealership | Auto dealerships are businesses that are authorized to sell new or used automobiles to consumers and serve as a direct dealer for automakers |
| Dealership Financing | Consumers can obtain dealer financing to help fund the purchase of a vehicle. A contract is signed with a dealership that requires a consumer to pay for a specific amount plus interest and funding fees over a certain period of time. Dealers will send the details of the consumer’s financials to various lenders to find one that will approve the loan. |
| Depreciation | Depreciation refers to the decline in the value of a vehicle. Immediately after purchase, a vehicle will become less valuable as soon as it is used. Put another way, depreciation is the rate at which an automobile loses its value over time |
| TERM | DEFINITION |
|---|---|
| Extended Warranty | Vehicles come with a manufacturer’s warranty when purchased, but buyers can choose to purchase an extended warranty. This serves as a form of insurance policy on the vehicle to cover the cost of potential repairs in the future. An extended warranty is usually good for a certain period of time and/or mileage. |
| TERM | DEFINITION |
|---|---|
| Lease | A contract that allows an individual the right to use or occupy a property for a specified period of time in exchange for a monthly payment. Leases are common for a property like apartments and vehicles. The individual on the lease does not own the asset at the end of the lease’s term, it is strictly for rental purposes. |
| TERM | DEFINITION |
|---|---|
| MSRP (Manufacturer’s Suggested Retail Price) | Car manufacturers will offer recommendations on how much a car should be priced at the retail level, known as the manufacturer’s suggested retail price, or MSRP. The purpose of the MSRP is to standardize pricing in the automobile industry so that there is not a lot of fluctuation in price from one dealership to another. |
| TERM | DEFINITION |
|---|---|
| Title Loan | A title loan uses the vehicle title as a form of collateral to secure a loan. Borrowers must own their vehicles free and clear and no longer owe any amount on a car loan. A lender will place a lien on the car title in exchange for funds. If the borrower defaults on the loan, the lender can take possession of the vehicle and sell it to cover any losses. |
| Trade-in Allowance | A trade-in allowance is the amount that a car dealer will reduce the cost of a new car purchase by after the consumer’s old vehicle has been traded in. It is somewhat like being given credit from the sale of an existing vehicle that is then applied to the purchase of a new vehicle. |
| Trade-in Value | A trade-in value is the amount that dealerships offer consumers for their vehicle and is typically applied toward the purchase price of another vehicle. Dealerships will assess the value of the vehicle and will base the amount that can be applied to a new car purchase. The consumer will then trade in the old vehicle and the assessed value amount will be deducted from the price of another vehicle. Trade-in value is often different than what the vehicle may be worth when sold in the open market. |
| TERM | DEFINITION |
|---|---|
| Vehicle Identification Number (VIN) | Every vehicle will have its own unique vehicle identification number, which is used to identify a specific vehicle. No two vehicles will have the same VIN, making them easily identifiable with this unique 17-character code. |
