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Aside from a home, a car is one of the biggest purchases you’ll ever make. Since most of us don’t have that kind of money sitting around, car dealerships, banks and other financial institutions will front you the cash to buy the vehicle in the form of an auto loan. But, before you sign on the dotted line, you want to make sure you can afford the monthly payments on your loan. That’s where our car loan calculator comes in—plug in a few key figures and you’ll see exactly where you stand in terms of monthly carrying costs and total interest payments.
Try the Car Loan Calculator For Yourself
See what happens to the monthly payment if you adjust the price, trade-in value, down payment, interest rate or length of loan.
You’ll probably notice that as you increase the term, the monthly payment goes down but the total interest paid goes up. That’s because the longer you take to pay off the loan, the less you hand over for each payment; but you also end up paying extra interest on the loan for those additional months.
Why Use a Car Loan Calculator?
It can be tough to figure out what you can afford based on a car’s price alone since you will be paying it off over several months or years as well as paying interest on the loan. A better measure of affordability is the monthly payment, which will go up or down depending on the interest rate charged and the length of your loan. The longer you take to pay off the loan, the lower the monthly payment will be, but you’ll end up paying a lot more overall in interest payments.
If this sounds confusing, don’t worry. That’s the beauty of the car loan calculator—it will crunch the numbers for you so you can make a more informed choice. When using the calculator, make sure you understand all the terminology it contains, as explained below.
Car Loan Calculator Terms
Price of New Car: This is the final amount the seller will be charging you for the vehicle itself, after accounting for any rebates or special offers. This amount does not include registration fees or sales taxes.
Registration Fees: To become the legal owner of a car bought in Canada, you must register as the owner through your provincial government. Registration fees vary by province and type of vehicle, but you can expect to pay somewhere around $150 to $200 for the vehicle permit, license plate and sticker.
Sale Tax Rate: Just as with other goods, the rate of sales tax charged on a car is based on the province where you make the purchase. So, that’s 5% federal goods and services tax (GST) in provinces without provincial sales tax; 5% GST plus the provincial sales tax in provinces that do charge provincial tax, or the combined harmonized sales tax (HST) rate if that’s what your province uses.
Trade-in Value: If you already own a car, the dealership might choose to buy it from you for a given amount. This amount is the trade-in value. Canadian Black Book is a good resource for getting estimates on how much you might get for your specific vehicle, based on its make, model, condition, mileage and age.
Down Payment: Aside from the sale price of your new car and the trade-in value for your old car, the amount of your down payment will have the most impact on the size of your loan. Obviously, the more you can pay upfront in the form of a down payment, the less you’ll need to finance through a loan.
Length of Loan: Similarly, the greatest factor (aside from sale price) in terms of the size of your monthly payment is the amount of time you will take to pay off the loan. This is called the term, or length of loan, and is expressed in the number of months, such as 12, 24, 36, 48, 60 or 72.
Interest Rate: Your track record as a borrower, also called your credit score, will determine the annual rate of interest the dealership or other lender charges on your car loan. Those who may have damaged their credit scores through the misuse of credit cards or defaulting on other loan payments will pay a higher rate of interest than those with a solid history of paying up on time. (For more on how to improve a bad credit score, check out our Best Credit Cards for Bad Credit page.)
Financed Amount: This is the amount of your loan. The car loan calculator automatically deducts any trade-in rebate and your down payment from the total cost of the vehicle, including taxes and registration fees, to determine this figure.
Monthly payment: This is the monthly carrying cost of the car loan—the amount you will pay each month.
Total Interest Paid: This is how much you’ll end up paying the lender in interest charges over the entire term of the loan. Add this amount to the purchase price, taxes and other fees to see what you’ll pay for the car overall, once you include the costs of borrowing.
Parting Words: Keep Calm and Car On
Despite all adjustments to the car loan calculator, if you still can’t come up with a monthly payment you can afford, you still have a few options. First, see if you can get the dealer to come down on price (or offer you more on the trade-in) and/or look for a better deal elsewhere. You could also consider postponing your car purchase for a few months and save a larger down payment in the meantime. If all else fails, you might need to look around for a less-pricey vehicle make or model. Whatever you decide, be sure to run the numbers through the car loan calculator to make sure your car payments won’t wreck your finances.