How to Calculate Your Car Loan Payment: Formula and 3 Examples
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You can calculate your car loan payment with one formula and three numbers: the amount you borrow, the interest rate, and the number of payments. This guide walks through the formula step by step, then applies it to three worked examples, including an Ontario purchase with a trade-in, sales tax, and a down payment. For more borrowing guides, visit our loans hub.
Every figure below was calculated for this guide. The interest rates in the examples are illustrations, not quotes from a lender. Sales tax rates are those published by the Canada Revenue Agency (CRA) as of October 18, 2026.
The car loan payment formula
Car loans in Canada are amortized: each payment covers the interest for the period, and the rest reduces the balance. Because the payment stays the same, the share that goes to interest shrinks over time. The standard formula for a monthly payment is:
Payment = P × r ÷ (1 − (1 + r)−n)
Here is what each letter means:
- P: the amount financed, after taxes, fees, trade-in, and down payment
- r: the monthly interest rate, which is the annual rate divided by 12
- n: the total number of monthly payments
The formula assumes the annual rate is compounded monthly, which is the usual way car loans are quoted. Your loan agreement shows the annual percentage rate and the total cost of borrowing, so you can check your own result against it.
Example 1: $35,000 over 60 months
Say you finance $35,000 at an annual rate of 6.99% over 60 months. First, convert the annual rate to a monthly rate: 0.0699 ÷ 12 = 0.005825. Next, multiply the amount by that rate: $35,000 × 0.005825 = $203.875.
Then work out the bottom of the formula. (1.005825) raised to the power of −60 equals 0.70576, and 1 − 0.70576 = 0.29424. Finally, divide: $203.875 ÷ 0.29424 = $692.88 per month.
Over 60 months, you pay $41,572.61 in total. Of that, $6,572.61 is interest. That last number is the real cost of borrowing, and it is the one to compare between offers.
Example 2: the same loan over 84 months
Now stretch the same $35,000 at 6.99% to 84 months. The formula gives a payment of $528.07, or $164.81 less per month than the 60-month loan. That lower payment is why dealers often quote long terms first.
The total tells a different story. Over 84 months you pay $44,358.11, of which $9,358.11 is interest. You pay $2,785.50 more in interest for the same car, and you carry the debt two years longer.
A long term also raises the risk of negative equity. The Financial Consumer Agency of Canada (FCAC) notes that a new car may be worth 25% less after one year (FCAC). With a slow repayment schedule, your balance can stay above the car's value for years.
Payments by loan term
The table below applies the formula to a $35,000 loan at 6.99% across five common terms. Each line uses the same rate, so only the term changes.
| Term | Monthly payment | Total interest | Total paid |
|---|---|---|---|
| 36 months | $1,080.54 | $3,899.38 | $38,899.38 |
| 48 months | $837.96 | $5,221.90 | $40,221.90 |
| 60 months | $692.88 | $6,572.61 | $41,572.61 |
| 72 months | $596.55 | $7,951.40 | $42,951.40 |
| 84 months | $528.07 | $9,358.11 | $44,358.11 |
How sales tax changes the amount
Sales tax is usually added to the price and financed with the car, so it raises both the payment and the interest. Rates depend on your province. As of October 18, 2026, the CRA lists these rates (CRA):
- Ontario: 13% HST
- Nova Scotia: 14% HST
- New Brunswick, Newfoundland and Labrador, Prince Edward Island: 15% HST
- Quebec: 5% GST plus 9.975% QST
- Alberta, Yukon, Northwest Territories, Nunavut: 5% GST only
British Columbia, Manitoba, and Saskatchewan add a provincial sales tax to the 5% GST, and vehicle purchases can follow specific provincial rules. Check your province's rules before you finalize the amount financed.
How a trade-in lowers the tax
When you trade in your car to a dealer, the GST or HST is calculated on the net amount: the price of the new vehicle minus the trade-in allowance. The CRA explains this trade-in approach in its notice on used goods (CRA). In an HST province, this lowers the tax on the whole purchase, not just the federal portion.
Example 3: an Ontario purchase with a trade-in
Here is a complete calculation. You buy a $40,000 car in Ontario, trade in your old car for $10,000, and put $5,000 down. The loan runs 60 months at 6.99%.
- Subtract the trade-in: $40,000 − $10,000 = $30,000.
- Add 13% HST on the net amount: $30,000 × 0.13 = $3,900.
- Subtract the down payment: $30,000 + $3,900 − $5,000 = $28,900 financed.
- Apply the formula: $28,900 at 6.99% over 60 months gives $572.12 per month.
Total interest over the loan comes to $5,427.10. Licence, registration, and dealer fees are not included here; add them to the amount financed if you roll them into the loan.
Compare that with selling your old car privately for the same $10,000 and using the cash as a down payment. You would then pay HST on the full $40,000, which is $5,200, so you would finance $30,200 and pay $597.85 a month. The trade-in saves $1,300 in tax in this example. A private sale can still come out ahead if it brings in more than the dealer's offer.
How the down payment changes the payment
A down payment reduces the amount financed, which lowers both the payment and the interest. On the same 6.99% rate over 60 months:
- $35,000 financed: $692.88 a month, $6,572.61 in interest
- $30,000 financed ($5,000 down): $593.89 a month, $5,633.67 in interest
The $5,000 down payment saves $98.99 a month and $938.94 in interest. It also gives you a cushion against depreciation in the first year.
How the rate changes the payment
Your interest rate depends largely on your credit file. Here is the same $35,000 over 60 months at different rates:
- 0%: $583.33 a month, no interest
- 4.99%: $660.33 a month, $4,619.97 in interest
- 9.99%: $743.47 a month, $9,608.46 in interest
- 19.99%: $927.09 a month, $20,625.47 in interest
The gap between a promotional 0% rate and a 19.99% subprime rate is more than $20,000 on the same car. Improving your score before you buy is often the cheapest way to lower your payment; our guide to credit score ranges explains where the better rates start.
Check your numbers in a spreadsheet
Ratesopedia does not have a car loan calculator. Any spreadsheet can do the math with the PMT function: =PMT(0.0699/12, 60, -35000) returns 692.88. Change the rate, the number of months, and the amount to test your own loan.
Once you have a loan, extra payments shorten it and cut the interest. Our debt payoff calculator shows how much faster you can finish with a higher monthly amount.
Conclusion
To calculate your car loan payment, start from the amount financed after tax, trade-in, and down payment, convert the annual rate to a monthly rate, and apply the formula. Then compare offers on total interest, not on the monthly payment alone. In our examples, stretching a $35,000 loan from 60 to 84 months added $2,785.50 in interest, while a trade-in in Ontario saved $1,300 in HST.
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Frequently asked questions about car loan payments
What is the formula to calculate a car loan payment?
The monthly payment equals P × r ÷ (1 − (1 + r)−n). P is the amount financed, r is the annual rate divided by 12, and n is the number of monthly payments. For $35,000 at 6.99% over 60 months, the result is $692.88. You can check it in a spreadsheet with the PMT function, and our loans hub links to related borrowing guides.
How much is the payment on a $35,000 car loan?
At an illustrative rate of 6.99%, a $35,000 loan costs $1,080.54 a month over 36 months, $692.88 over 60 months, and $528.07 over 84 months. The longer the term, the more total interest you pay: $3,899.38 over 36 months versus $9,358.11 over 84 months. Your actual rate depends on your credit, so check your credit score before you shop.
Is a 60-month or an 84-month car loan better?
A 60-month loan usually costs less overall. In our example, the 84-month term lowers the payment by $164.81 but adds $2,785.50 in interest. The longer loan also increases the risk of owing more than the car is worth, since a new car can lose 25% of its value in the first year, according to the FCAC. Choose the shortest term whose payment fits your budget, and use our debt payoff calculator to plan extra payments.
Is sales tax included in a car loan?
It usually is, when you finance it with the car. In Ontario, 13% HST on a $30,000 net price adds $3,900 to the amount financed, which then accrues interest. You can pay the tax in cash to reduce the loan, but most buyers roll it in. Rates differ by province, from 5% GST in Alberta to 15% HST in Atlantic provinces, as of October 18, 2026. Our loans hub covers other financing questions.
Does a trade-in reduce the sales tax on a new car?
Yes, when you trade in to a dealer. The GST or HST applies to the price minus the trade-in allowance, as the CRA explains. In our Ontario example, a $10,000 trade-in cut the HST from $5,200 to $3,900. Quebec calculates the QST on a different base, so check Revenu Québec's rules if you buy there. Before you decide, compare the dealer's offer with what a private sale could bring, and review your car insurance costs for the new vehicle.
How do I calculate bi-weekly car loan payments?
Use the same formula with a bi-weekly rate and count. Divide the annual rate by 26 and use 26 payments per year. For $35,000 at 6.99% over 5 years (130 payments), the bi-weekly payment is $319.37 and total interest is $6,518.35, or $54.26 less than monthly payments. Lenders can calculate bi-weekly schedules differently, so ask for the amortization table. Our debt payoff calculator helps you test faster repayment.
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