Car Loan Calculator (Canada)

About This Car Loan Calculator

Getting financing for a new or used car purchase can be daunting, and negotiating a reasonable car loan interest rate is often challenging. This car loan payment calculator can be used for both new and used car loans, and it also takes into account the car sales tax applicable to your province. The calculator will help you determine what kind of loan terms you can afford and how much a car loan will cost you.

You can enter the following values to get started:

1. Purchase Price, Loan Term and Interest Rate: To use this calculator, enter your car purchase price, the loan term in months, and the expected interest rate.
2. Payment Frequency: Select the payment frequency from monthly, bi-weekly or weekly.
3. Province: Select the province where the car will be purchased. This will use the car sales tax rate that applies in that province.
4. Down payment: Making a down payment can reduce your car loan payments and will be subtracted from the loan amount.
5. Trade-In Value: If you're trading in a car, you can enter the estimated trade-in value to lower your auto loan amount.

The car loan calculator will also show how the length of your car loan affects both your monthly car loan payment and the total interest paid over the life of the loan.

Car Financing Options in Canada

There are several options for financing a car purchase in Canada. You can finance through a bank, credit union, or dealer. You can even finance a car purchase by using a HELOC, a personal line of credit, or a cash-out refinance. Each option has its own set of pros and cons, so it's important to compare all of your options before making a decision.

Average Car Loan Rates in Canada Based on Credit Score

Car Loan vs. Car Lease

An alternative to car financing is to lease a car. When you lease a car from a dealer, you still need to make monthly lease payments. Leasing typically offers lower monthly payments, but you don’t build equity and mileage limits apply. At the end of the lease, you have the option to return the car or purchase it.

Car Sales Tax by Province

When you purchase a car in Canada, you must pay sales tax in the province or territory where the vehicle is registered, similar to when you buy any item. In most provinces, car sales tax can be added directly to your loan amount and paid along with loan payments. Depending on the province, you’ll pay either a 5% GST, a combination of GST and PST, or a single Harmonized Sales Tax (HST).

The total tax you pay depends on the tax rates of the province where you live, and in B.C., the vehicle's price also affects the tax amount.

It is also noteworthy that GST does not apply to private sales. The table below outlines the sales tax rates applicable for dealer and private sales of cars by province in Canada.

B.C. Car Sales Tax (PST) by Purchase Price

British Columbia is the only Canadian province where the provincial car sales tax varies by vehicle price. The PST can range from 7% for cars under $55,000 to as high as 20% for cars that are $150,000 or more!

Source: Government of British Columbia, Provincial Sales Tax (PST) Bulletin

Federal Luxury Car Tax (National)

The federal government introduced a luxury tax under the Select Luxury Items Tax Act, which came into effect on September 1, 2022, for certain vehicles (and other luxury items).

The luxury tax applies only to new vehicles and does not apply to used cars. This tax applies to passenger vehicles priced over $100,000, unless an exclusion applies.

Calculation

The tax payable is the lesser of:

• 10% of the total vehicle price (including additional charges); or
• 20% of the amount exceeding the $100,000 threshold.

After calculating the luxury tax, GST/HST is applied on the sum of the vehicle price plus the luxury tax amount.

A $140,000 vehicle could therefore cost $155,000 after taxes are applied.

How to Budget for a New Car in Canada?

Estimating your monthly payment is just one part of planning a car purchase. Before choosing a vehicle or a loan, it’s important to understand how much you can realistically afford and how a car loan fits into your overall budget.

🚗 How Much Car Can I Afford in Canada?

A common rule used to estimate how much you can afford and budget for your car purchase is the 20/4/10 rule, which suggests:

• Put 20% down payment for the car loan
• Keep the car loan term four years or less
• Spend up to 10% of your monthly income on car-related expenses.

For example:

If you buy a car worth $30,000 and your monthly take-home income is $5,000, you should put down a $6,000 down payment and keep your total monthly car costs around $500. That way, you will be able to pay off the car in four years, as the rule suggests.

It is also noteworthy that monthly car costs aren’t limited to loan payments but also include:

• Insurance
• Gas/charging
• Maintenance & repairs
• Parking or tolls (if applicable)

💰 How to Budget for a Car Purchase?

When preparing to buy a new car, estimate your monthly payments using the calculator above and also consider the following:

• Estimate insurance premium payments, which usually vary by postal code and are often higher for new vehicles
• Budget for fuel or EV charging
• Plan for maintenance (EVs often cheaper; luxury cars more expensive)
• Saving for a down payment, even $2,000 to $5,000, lowers your loan amount and interest.
• Consider extra payments if your loan allows them to reduce interest quickly

⚠️ Why You Shouldn’t Focus Only on Monthly Car Payments

While the monthly payment amount is crucial for budgeting, the actual loan amount is also significant. Spreading out the auto loan over a longer term can lower your monthly payments, but it will increase the total cost of the loan by increasing the total amount of interest.

• A shorter term = higher monthly payment, less interest overall
• A longer term = lower monthly payment, more interest overall

When negotiating, avoid focusing on monthly payments; instead, negotiate the total price of the car (including fees) to secure the best deal.

FAQs