Auto loan calculator

Our auto loan calculator helps you estimate your monthly payments when financing a vehicle.

Page written by Ian Hawkins. Last reviewed on July 16, 2024. Next review due April 1, 2025.

This calculator is intended for illustration purposes only and exact payment terms should be agreed with a lender before taking out a loan.

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What are auto loans?

Auto loans are a type of financing designed specifically for purchasing vehicles. In Canada, these loans allow you to spread the cost of a new or used car over a period of time, typically ranging from 2 to 7 years. The loan amount covers the cost of the vehicle, and you repay it through monthly installments, which include interest. Auto loans can be secured or unsecured, with secured loans generally offering lower interest rates because the vehicle itself serves as collateral.

Read more if you are specifically looking at business car finance.

What is better cash or financing?

Once you’ve chosen the perfect car model and colour, the next big decision is how to pay for it. Should you finance your new car or use the cash you’ve diligently saved? Each option has its own set of advantages and disadvantages. Let’s take a closer look at both.

Cash payment

Paying with cash is straightforward and often the cheapest option in the long run. You pay the agreed-upon amount and don’t have to worry about monthly payments or interest. However, saving enough cash to buy a car outright isn’t feasible for everyone and might not always be the best use of your savings.

Pros of buying a car using cash:

Easy one-time transaction: No ongoing payments or financing complications.
Flexibility: No loan restrictions or conditions to adhere to.
No interest: Avoid paying interest, making the car cheaper overall.

Cons of buying a car using cash:

Time-consuming: It can take a long time to save up enough money.
Opportunity cost: Your cash could be invested elsewhere, potentially earning a return.

Finance payment

Financing a car through a loan is a common alternative to paying cash. There are various financing options tailored to your needs, including secured and unsecured loans. A secured loan uses the car as collateral, often resulting in lower interest rates.

Pros of buying a car using finance:

Immediate access: Get a reliable vehicle sooner without waiting to save.
Generally lower interest rates: Secured loans typically offer better rates than unsecured loans.
Build credit history: Regular payments can help improve your credit score.

Cons of buying a car using finance:

Paying interest: You’ll pay more over time due to interest charges.
Vehicle choice limitations: Some lenders may impose restrictions on the types of vehicles you can finance.

Other auto loan strategies:

When considering an auto loan, it’s important to have a strategy to ensure you get the best deal:

Check your credit score: A higher credit score can help you qualify for lower interest rates.
Consider the loan term: While longer terms lower your monthly payments, they can increase the total interest paid over the life of the loan.
Make a larger down payment: This reduces the amount you need to borrow and can lower your interest rate.
Read the fine print: Understand all fees, penalties, and conditions before signing a loan agreement.

By carefully considering your options and understanding the pros and cons of each payment method, you can make an informed decision that best suits your financial situation and vehicle needs.

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