Getting financing for a new or used car purchase can be daunting, and negotiating a good car loan interest rate is often challenging. This car loan calculator will help you determine what kind of loan you can afford, how much a car loan will cost you, and how making a down payment can reduce your car loan payments. If you're trading in a car, you can enter the estimated trade-in value to lower your monthly payment.
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. This car loan calculator can be used for a new or used car loan, and it also factors in car sales tax for your province. While car loans are used to buy a car, you can use a car title loan to borrow against a car you already own outright.
To use this calculator, enter your car purchase price, the loan term in either months or years, and the interest rate. You can optionally include a down payment and trade-in value which will be subtracted from the loan amount. If you have an outstanding car loan on the car being traded in, you will need to enter the remaining loan balance of that loan. Finally, select the province that the car will be purchased in. This will use the car sales tax rate that applies in that province.
How do you calculate car loan payments? To calculate your monthly car loan payment, you will need to know the loan amount, interest rate, and term of the loan.
The loan amount is the amount of money that you are looking to borrow. This would be the car’s purchase price plus any taxes and fees, minus any down payment that you wish to make and the trade-in value of your current car, if any.
The car loan payment formula is:Where:
r = Monthly Interest Rate
n = Number of Payments
How to Calculate a Car Loan Payment:
To find your monthly interest rate, divide your annual interest rate by 12. Most car loans in Canada are quoted as an annual rate, so you'll need to perform this calculation to get your monthly rate.
The number of payments that you make on your car loan will depend on your term length. That’s how long you have to pay back the loan. The average car loan term in Canada is less than 72 months, or around five years. Most car loans allow for a maximum term length of 8 years (96 months).
Once you know your car loan amount, monthly interest rate, and number of payments, you can use the car loan payment formula above to calculate your monthly payment amount. You can also use the car loan calculator at the top of this page to see how much your car loan payments would be.
There are a few different 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 with 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.
Dealer financing is often the easiest option, as you can usually get financing right at the dealership. The biggest advantage of dealer financing is that it's convenient and fast. You won’t need to find a bank and the paperwork is handled by your car dealer. However, you may end up paying a higher interest rate than if you get a loan yourself directly from a bank or credit union. That’s because dealers make a commission on car financing, which might be added to the interest rate offered to you.
Dealers may have special promotions with lower financing rates for certain car models. For example, as of July 2022, Toyota offers financing from 4.09% for the 2022 Corolla but a higher rate starting from 4.99% for the 2022 RAV4. Ford offers 1.99% purchase financing for up to 60 months for the 2022 Ford Escape and 0.99% purchase financing for up to 72 months for the 2022 F-150. While rare, dealers may even offer 0% financing from time to time.
An alternative to buying a car with dealership financing is to lease a car. When you lease a car from a dealer, you still need to make monthly lease payments. However, these payments are usually lower than those you would make if you purchased the car outright with a car loan. At the end of the lease, you can either return the car or buy the car.
Bank or Credit Union
With a bank or credit union financing, you'll get a personal car loan that you can use to pay for your car purchase. The biggest advantage of going directly to a car loan lender is that you'll usually get a lower interest rate than if you finance through a dealer. However, the process can be time-consuming, and you may not be able to get approved if you have bad credit.
Home Equity Line of Credit (HELOC)
A home equity line of credit (HELOC) allows homeowners with built-up equity to borrow large amounts of money at low interest rates. You can use money borrowed from a HELOC for anything, including buying a new car, which makes this type of loan attractive to many people as it has other uses as well.
You’ll also only pay interest on the amount borrowed, and since a HELOC allows you to borrow money at any time, you can borrow money only when you have actually purchased a car. You’ll know you have funds ready and available to purchase when shopping for a car, without having to get a car loan pre-approval.
Personal Line of Credit
Similar to HELOCs, a personal line of credit allows you to borrow money at any time up to your credit limit, and you’ll only pay interest on the amount borrowed. The difference is that unsecured personal lines of credit will have a higher interest rate than HELOCs, and it may even have a higher interest rate than personal car loans. A personal line of credit might be a better choice if you are still shopping for a car and want flexibility.
An alternative to HELOCs, a cash-out refinance is when you refinance your mortgage in order to borrow more money based on your home equity. This can be a good option if you have built up enough equity in your home but want to lock-in a mortgage rate instead of having a variable HELOC rate.
A drawback with a cash-out refinance is that there are limits to how much you can pay back your mortgage every year. If you exceed your lender’s prepayment limits, you might be charged significant prepayment penalties. HELOCs, personal lines of credit, and even personal car loans will usually allow you to pay some or all of the loan at any time, with no penalties or fees.
The interest rate for car loans in Canada can range from 4% on the low-end to well over 10%. The interest rate for your car loan will depend on factors such as your credit score, the loan term length, and even the type of car. To learn more about rates and to find out they are determined, visit our page about car loan rates in Canada.
Just like how you need to pay sales tax when you purchase an item, you'll also need to pay sales tax when buying a car. The amount of sales tax you'll need to pay depends on the province or territory where you live. In all provinces, you will need to pay a GST of 5% on the purchase of a new car. Some provinces also charge a provincial sales tax (PST), while others might have a combined sales tax (HST).
|Province||Car Sales Tax Rate|
|British Columbia||7% - 20%|
|Newfoundland and Labrador||15%|
B.C. is the only province in Canada where the car sales tax rate depends on the purchase price of the car. In British Columbia, the car sales tax rate can range from 7% for cars under $55,000 to as high as 20% for cars that are $150,000 or more!
|Car Price||B.C. Car Sales Tax Rate|
|Less Than $55,000||7%|
|$55,000 to $55,999.99||8%|
|$56,000 to $56,999.99||9%|
|$57,000 to $124,999.99||10%|
|$125,000 to $149,999.99||15%|
|$150,000 and over||20%|
A similar luxury car tax may be coming to the rest of Canada through a proposed luxury tax by the federal government. This federal luxury car tax would only apply to cars over $100,000, with the tax being the lesser of 10% of the total car price or 20% of the total car price over $100,000.
Regular federal and provincial sales tax, through GST or HST, would then be added based on the cost of the car plus the luxury tax. This means that you will be paying sales tax on top of the luxury car tax.
For example, if you purchase a $100,000 car with a federal 10% luxury tax, you would be required to pay an additional $10,000 in luxury car tax. In addition, you would also have to pay GST or HST on the total cost of the car including the luxury car tax. Depending on your province, this could add an additional $13,000 or more in taxes! So, all in all, you could be looking at paying upwards of $23,000 in taxes on a $100,000 car.
Did you know that the federal government provides incentives of $2,500 to $5,000 for the purchase of plug-in hybrid and electric vehicles in Canada? The Incentives for Zero-Emission Vehicles (iZEV) Program was created in 2019 to encourage the sale of zero-emission vehicles in Canada. Since then, over 150,000 vehicles have been sold under the program and close to $650 million have been paid out!
|Electric Range||Incentive Amount|
|50 km or more||$5,000|
|Less than 50 km||$2,500|
Cars with an electric range of at least 50 km can qualify for an incentive of $5,000, while cars with an electric range less than 50 km can qualify for an incentive of $2,500. Cars will also need to have a MSRP of less than $55,000 for the base model or up to $65,000 MSRP for higher trims. As of 2022, there were 116 car models that qualify for the iZEV Program.
The incentive is applied by the dealership when you purchase an eligible vehicle. This reduces the amount of any car loan that you may need to get to finance the purchase of the hybrid or electric vehicle.
More than half of all cars sold under the iZEV program were in Quebec. British Columbia made up just under a third of all incentives, followed by Ontario with 13% of all incentives claimed.
|Prince Edward Island||321||0.2%|
|Newfoundland and Labrador||259||0.2%|
Knowing your estimated monthly car loan payment amount is helpful in budgeting for a new vehicle purchase. However, you'll still need to answer some questions that relate to your own financial situation. For example, how much car can I afford? How do I budget for buying a car? Should I even focus on the monthly payment when buying a new car? These are all great questions that you should answer before you start shopping for your new car. We’ll take a look at some answers to these questions in the section below.
The first step in buying a car is understanding how much you can afford to spend. This means looking at your budget and factoring in all of your other expenses. It’s generally recommended that your monthly car loan payments should not exceed 10% of your monthly income.
Keep in mind that there’s more than just the purchase price of the car to consider when creating your budget. You will also need to factor in things like insurance, gas, and maintenance. When taking these other ongoing costs into account, the total monthly cost of your car should not exceed 20% of your monthly income.
For example, if your monthly income is $5,000, then you should make sure that your monthly car loan payment does not exceed $1,000. A $50,000 car loan at a 5% interest rate for 60 months would have a monthly payment of $944, and a total interest cost of just over $6,600.
You’ll need to estimate the cost of car insurance, gas, and maintenance for your new car when budgeting for it. Keep in mind that the cost of car insurance for a new car will generally be higher than the cost for older cars. Maintenance costs will also depend on the type of car you have. Newer cars tend to have lower maintenance costs than older cars.
When budgeting for a car purchase, see if you have extra room that you can use to make extra payments towards your car loan. If you still have time before your purchase, you might want to save up money for a down payment. This will help you pay off your car loan faster and avoid having to make payments for a longer period of time.
While the monthly payment amount is important when it comes to budgeting, the actual loan amount is also important. Spreading out the auto loan over a longer term can bring down your monthly payments, but it will bring up the total cost of the loan. That’s because you’ll be paying more interest the longer you have the loan outstanding.
For example, spreading a $50,000 car loan at 5% for 96 months (8 years), which is usually the longest car loan term offered by banks in Canada, will result in a monthly payment of just $633. While that cuts off a third off the monthly payment amount, it causes the total interest cost to jump to $10,700.
When negotiating car prices and financing, it might be tempting to negotiate based on the monthly payment amount. However, this can end up costing you more money in the long run if you’re not careful. Instead, negotiate based on the total price of the car, including any extras and fees. This will help ensure that you get the best deal possible.