Thinking about buying a new or used vehicle? You may need a car loan to finance this purchase. A car loan is a type of financing option. Banks or dealerships offer these loans. This type of financing makes it affordable for people to purchase a vehicle. After all, cars are high-priced items. Depending on the price of the vehicle, Canadians often struggle to buy a vehicle outright.
A car loan payment term can last 12 months, 36 months, 48 months and even as long as 60 months. Sometimes a down payment is needed for a vehicle. This might not always be the case. Regardless, there are many factors to consider when looking for a vehicle and a vehicle loan. One major component is whether your budget can handle a monthly payment or bi-weekly payment term.
A calculator for car loan planning can help determine total interest and more. The online tool can be found on many bank (see Scotiabank) and dealership websites. We also have a handy car loan calc, right here at INCOME.ca.
It helps potential buyers figure out what their payments may be. A car loan calculator can also help determine if you can afford a vehicle payment. Another advantage is that you can work with the tool to adjust factors. This can help you change scenarios to fit a car loan into your budget.Perhaps, adjust the price of the vehicle to suit your affordability.
Car Loan Calculator Definitions of Terms
Before you fill out the car loan calculator form, below are some definitions.
Agreement of Sale: this is a document that outlines the terms of the purchase. It’s an “agreement” between the seller and buyer. It’s sometimes referred to as the “Purchase Agreement” or “Bill of Sale”.
Annual Percentage Rate (APR): the cost of borrowing, annually. This is noted as a percentage of the total vehicle price.
Canadian Black Book: is a reference used around the resale value of a used vehicle. This is determined by specific geographic regions across the country. It specifies the future trade-in or current resale number for a vehicle. It is like the “Kelley Blue Book” used in the United States.
Certified Pre-Owned (CPO): this refers to a used vehicle that passes inspection. The inspection is done by the manufacturer and certified.
Co-signer: another person who “signs” onto the car loan. They become equally responsible for it. At times, there are households/individuals who cannot be approved on their own. They turn to a friend or family member to co-sign. This is a huge responsibility that should not be taken lightly. If the person you co-sign for defaults, this can affect your credit score.
Down payment: this is the amount of money you have to place against your vehicle’s purchase price. The more money you have, the less your car loan will be. A higher down payment also means less money to finance.
Financed amount: the total amount of money you will need to finance your car loan. This amount takes into account the trade-in value and down payment.
Interest Rate: this is the rate of interest banks, or a car dealer charges you each year for your loan. Those with good credit scores qualify for a low interest rate. Those with bad credit scores pay higher interest rates, though high interest rates can also be a good thing.
Loan Term: this is the number of months it will take to repay the car loan in full. At the end of the term, you own your vehicle outright. The longer the length of the loan, the lower your car payments. With that said, it also means it takes longer to pay off. Plus, you’ll pay more in total interest costs. Terms range from six months to up to 10 years.
Payment Frequency: how often your car payments are made. You can choose from the following:
- Weekly – 52 payments per year
- Bi-weekly – 26 payments per year
- Monthly – 12 payments per year
Payment: the total amount you pay each month, bi-weekly period, or weekly, against your car loan.
Registration Fees: Canadian car buyers must register their vehicles with their provincial government. This must occur in order to take ownership of your car. The registration fees include your car’s license plate and sticker, as well as the vehicle permit. For those who buy from a dealership, the vehicle paperwork is completed by your sales rep. The fees go to the dealer, who filters it to the provincial agency needed. Fees do vary across Canada, which we already explained in our dedicated reviews of car loans in BC, Ontario, and also Ottawa, Edmonton, Toronto, and Calgary.
Sales Tax Rate: the sales tax rate depends on the dollar amount of car, and the province you purchase your car in. Another factor is whether you are buying new or used. Used car sales tax rates vary across the provinces.
Total Interest Paid: how much you are paying in total when it comes to the interest rate charges for your car loan. This is accumulated over the term.
Total Purchase Price: also known as the “selling price” of your car. This refers to the “total cost” of the vehicle. This number includes all fees, with registration and sales taxes excluded.
Trade-In Value: This applies when you trade in an old car for a new one. Your dealer might offer you a discount on your new car. This is based on the value of the old one. This depends on your old vehicle’s make, model, age, and other factors. This is also referred to as “trade-in rebate”.
How to Use the Car Loan Calculator
First off, you’ll need to go to our car loan calculator tool. Looks like you’re in the right place. Time to fill in the basic information. You will need the following information:
- Vehicle loan amount, which is the amount you need to buy your new vehicle. This is the purchase price, minus any trade-in rebates or down payments.
- Your car loan term, which is how long it will take for you to pay off your loan.
- Interest rate, which you can estimate by checking current vehicle rates online. You may have to do a separate search for this.
Once you fill out the required field, hit the “calculate” button. The information should pop up rather instantly. In fact, the entire process may take a few minutes in total. If you believe the monthly payment that comes up is too high, you can change it. The tool only offers an idea of what your monthly car payment might be. You can make adjustments to the fields, and see if changing certain factors can help.
Some adjustments you can make:
- Increasing the length of your term. Note, this will make your monthly payments decrease. But you will pay more in interest rates when all is said and done. Still, increasing the months on your term will offer lower monthly payments. This may help you to fit a new vehicle into your budget. You can always pay off the loan if things change with your finances in the future.
- Speaking of, shop around for rates. If you plug in a lower interest rate, this could lower your monthly payments. There may be a bank, lender, or dealer that can offer a better rate. You might be able to negotiate a better rate.
- Look at increasing your down payment. If you can save more money for a higher down payment, this can lower your monthly payment. It can also decrease the amount of total interest.
- Finding a better purchase price can help fit a budget. You can go with a vehicle that has fewer bells and whistles. Maybe you can downsize the model you originally intended. There’s also a chance you can try another dealership and negotiate a better price.
- Go for a used car, instead of a brand new one. There’s a good chance you can find the same make and model, that is one or two years older. This will knock money off the purchase price. Thus, decreasing the amount you need to finance.
Frequently Asked Questions (FAQs)
How Accurate are Car Loan calculators?
It’s important to remember that our online calculator only offers estimates. They can provide a quick snapshot of what you would pay monthly on your car loan. With that said, they aren’t 100% accurate. A calculator won’t offer up the “exact” monthly payment amount you will have.
This is a tool to see if a car loan can meet your budget. It can also help you to play with numbers to meet your budget. They do provide a good number to work with. Not the exact figure that you will end up paying in the end. But sometimes, pretty close.
Should I Be Prepared With Exact Numbers?
You don’t have to have the “exact” figures like the price of the vehicle or term to insert into your car loan calculator (see also personal loan calculator). But doing your homework will help. In fact, providing “exact” numbers will help a lot. The closer the numbers are to your situation, the more accurate your results will be.
Does It Cost Me Anything To Fill One Out?
Nope. Filling out a car loan calculator is a free tool. There is also no obligation to work with the website or company it is available on. There is no risk or cost. But there are plenty of rewards. You get an idea around affordability. You can also work with numbers to see what can fit your budget best. Play around with 12 months, 36 months, 48 months, and 60 months, as the term. Also, juggle the price with the calculator. You may even find it fun!
What Kind of Credit Score is Needed For a Car Loan Approval?
Credit scores range from 300 to 900 points in Canada. The higher your credit score number, the better. Any rating at 660 or above is “good” to “excellent”. You can be pretty confident around approval if you have a score of this or higher. If you don’t, there still might be ways to gain approval. Each lender offers different requirements when it comes to car loan approvals.
What About Car Loan Interest Rates?
These rates are set based partially on credit scores. Borrowing at the prime rate is approved for scores 630 and over. Rates for these customers hit 9.99% and below. A credit score from 300 to 629 is thought of as “special finance or “subprime”. These lending rates hit between 10% to 29.5%. This depends on a person’s financial position.
When Is The Best Time To Buy A Car?
Sometimes buying a new car isn’t for the fun of it. At times, your vehicle will break down without a heads up. Then, some families are surprised with a new addition, and only have months to upgrade. Regardless, there are instances where a new vehicle purchase is needed right away.
If you can hold off, the best time to buy a car is during the holiday season. Many experts say that anywhere from Christmas Eve to New Year’s Day. All monthly, quarterly, and yearly targets come together on December 31st. This time of the year offers great sales and a good price for cars. Regardless, even if you are in a time pinch, shop around. There are interesting dealer sales all year round.
Another great time to dive in is when dealers have a 0% interest rate offer.
The Bottom Line
Adding another expense to any budget can be hard. The good news is that a car loan calculator can help you. It can offer you an idea around monthly costs. The online tool can also be manipulated to help you fit a car loan and price of a car into your budget. While it is not 100% accurate, it does offer a nice picture of what your car loan will look like. It’s also easy to use, and results are instant.
Additionally, there are things you can do to bring that monthly payment down. Looking at your savings account to increase your down payment is an option. Perhaps, selling an older vehicle will offer up some trade-in value. Then, there’s shopping around for the lowest Interest possible. Maybe even trying to negotiate one at the dealership.
While everyone has a “dream car”, downsizing on that dream might be needed. You can also purchase an older make and model of the car, to bring down the price. All this will also help decrease the car loan. This will ultimately reduce that car loan payment amount. At the end of the day, a car is a major purchase. Looking for ways to cut costs is something everyone should be doing.