Question 1

How is my monthly car loan payment calculated?

Accepted Answer

The calculator uses the standard amortising loan formula: M = P × r ÷ (1 − (1 + r)^−n), where P is the amount financed (vehicle price minus down payment), r is the monthly interest rate (annual rate ÷ 12), and n is the number of monthly payments. Each payment covers that month's interest first; the remainder reduces your principal balance. Car loans in both Canada and the USA compound monthly — there is no special compounding rule for auto financing.

Question 2

What is a good interest rate for a car loan?

Accepted Answer

As a general benchmark, new car loan rates below 7% APR are considered competitive for borrowers with good credit; 7–12% is average; rates above 15% typically reflect weaker credit or used-vehicle financing through a dealer. In Canada and the USA, new-vehicle financing through a manufacturer or bank typically ranges 5–12% APR. Used car loans from dealerships can run 8–18% or higher. The single most effective way to lower your rate is to improve your credit score before applying, or to get pre-approved through your own bank or credit union before visiting a dealer.

Question 3

How much should I put down on a car?

Accepted Answer

A common guideline is 20% for a new car and 10% for a used car. A higher down payment reduces the loan amount, lowers your monthly payment, decreases total interest paid, and reduces the risk of being "underwater" (owing more than the car is worth). New cars depreciate roughly 15–20% in the first year; a meaningful down payment helps ensure your loan balance stays below the vehicle's resale value throughout the term.

Question 4

What car loan term length should I choose?

Accepted Answer

Shorter terms (24–36 months) mean higher monthly payments but significantly less total interest — you pay off the vehicle faster and build equity quickly. Longer terms (60–84 months) reduce the monthly payment but dramatically increase total interest cost and the period during which you may owe more than the car is worth. A practical guideline: choose the shortest term whose monthly payment fits comfortably within your budget. Use the Term Comparison chart in this calculator to see the exact trade-off for your specific loan amount and rate.

Question 5

Does this calculator include taxes, fees, or insurance?

Accepted Answer

No. This calculator computes the financing cost only — principal plus interest on the amount financed. It does not include sales tax (HST/GST/PST in Canada or state sales tax in the USA), dealer documentation fees, extended warranty costs, gap insurance, or mandatory vehicle insurance. Always ask the dealer for a full out-the-door price and factor those additional costs into your budget before signing.

Question 6

What is the difference between the vehicle price and the amount financed?

Accepted Answer

The vehicle price is the full purchase price of the car. The amount financed is the portion you borrow: vehicle price minus your down payment. For example, a $35,000 vehicle with a $5,000 down payment results in a $30,000 loan. This calculator uses the amount financed as the loan principal — taxes and fees, if rolled into the loan, would increase this figure and should be added to the vehicle price field for an accurate estimate.

Question 7

What assumptions does this calculator make?

Accepted Answer

Three main assumptions: (1) the interest rate is fixed for the entire loan term — if your loan has a promotional or variable rate, actual payments will differ; (2) no origination fees, dealer markups, or other charges are included; (3) payments are made monthly and on time throughout the full term. This calculator is for illustrative purposes only. Request a full payment schedule from your lender before finalising any auto financing agreement.

Variable	Meaning
M	Monthly payment
P	Amount financed (vehicle price − down payment)
r	Monthly interest rate = annual rate ÷ 12 ÷ 100
n	Total payments = loan term in months

Car Loan Calculator

Payment Breakdown

Term Comparison

How It Works

The Payment Formula

Monthly Compounding — Canada and USA

How the Borrowing Cost Score Works

Assumptions

Frequently Asked Questions