Canadian Car Loan Calculator

Statistics Canada puts the average car loan rate at 6.66% for July 2026 (Bank of Canada data on new auto loans). Around that average, promotional rates on new cars from manufacturer finance arms can be lower (sometimes 0% on selected models), while used-car rates and rates for lower credit scores are typically higher — often 7–10% or more. The rate offered to an individual depends on their credit profile, the vehicle, and the lender.

Payments use the standard reducing-balance amortization formula: the rate per period is the annual rate divided by the number of payments per year, and the payment is set so the balance amortises to zero over the term. For CAD 40,000 at 6.66% over 60 months, the estimated monthly payment is about CAD 786, with total interest of about CAD 7,139. Early in the loan most of each payment is interest; by the final year almost all of it is principal.

Slightly. More frequent payments mean the balance falls a little sooner between periods, so total interest is modestly lower. On CAD 40,000 at 6.66% over 5 years: monthly payments cost about CAD 7,139 in interest, bi-weekly about CAD 7,080, and weekly about CAD 7,054. The bigger saving comes from accelerated bi-weekly payments (half the monthly amount every two weeks), which effectively adds one extra monthly payment a year and shortens the loan.

Indirectly. The Bank of Canada policy rate (2.25%, held 10 June 2026) influences the prime rate (4.45%) and the wider cost of borrowing, so car loan rates tend to move with it over time. However, car loans are priced on the lender’s funding costs and the applicant’s credit risk, so they sit well above the policy rate and do not move one-for-one. A fixed-rate loan is unaffected once signed.

0% offers exist, usually from manufacturer finance arms on selected new models, and mean no interest is charged. The relevant comparison is the total cost: a 0% deal may come with a smaller cash discount than a purchase financed elsewhere, so the headline 0% is not always cheapest overall. Per FCAC, comparing the total cost of borrowing across options — including any cash-purchase incentive — shows the true difference.

Terms commonly run from 12 to 96 months, with 60 months the traditional benchmark. Per FCAC, terms have lengthened significantly — 72, 84, and 96-month loans are now common because they lower the payment. The trade-off is more total interest: on CAD 40,000 at 6.66%, an 84-month loan costs about CAD 10,155 in interest versus about CAD 7,139 over 60 months.

Negative equity means owing more on the loan than the vehicle is worth. Per FCAC, it is a particular risk on long-term loans with small down payments, because vehicles depreciate fastest in their first few years while a long amortization pays the principal down slowly. Trading in a vehicle with negative equity often means rolling the shortfall into the next loan, which compounds the problem on each trade.

The factors that reduce the risk are structural: a larger down payment (so less is financed relative to the vehicle’s value), a shorter term (so principal falls faster than depreciation), keeping the vehicle longer before trading, and not rolling a previous shortfall into a new loan. Per FCAC, the loan balance and the vehicle’s estimated value can be compared at any time to see where the loan stands.

It depends on whether the loan is open or closed. An open loan can be repaid at any time without penalty; a closed loan may carry a prepayment charge set out in the agreement. Per FCAC, lenders must disclose the prepayment terms. Extra payments on an open loan are applied to principal, which reduces the balance on which interest is charged and shortens the loan.

Sales tax applies in every province — federal GST (5%) plus the provincial sales tax, or a combined HST, depending on the province (totals range roughly from 5% to 15%). Taxes are commonly financed as part of the loan, which increases the amount financed. For new vehicles over CAD 100,000, the federal Select Luxury Items Tax also applies. Provincial rules on private-sale taxation vary.

The Select Luxury Items Tax, in force since 1 September 2022, applies to new vehicles priced above CAD 100,000. The tax is the lesser of 10% of the total price or 20% of the amount above CAD 100,000, and GST/HST is then calculated on the price including the luxury tax. It applies to new vehicles only — used vehicles are not subject. Per CRA.

The Electric Vehicle Affordability Program (EVAP), launched 16 February 2026, offers up to CAD 5,000 for battery-electric and fuel cell vehicles and CAD 2,500 for plug-in hybrids. The final transaction value must be CAD 50,000 or less (no cap for EVs made in Canada), and vehicles must be made in Canada or a free-trade-agreement country. The incentive is applied at the point of sale, reducing the amount financed. The previous iZEV program is closed. Per Transport Canada.

For a personally owned vehicle used privately, car loan interest is not deductible. Where a vehicle is used to earn business or employment income, the CRA allows a deduction for the business-use portion of interest, subject to a monthly cap, alongside capital cost allowance limits for passenger vehicles. The rules depend on individual circumstances — refer to the CRA or a tax professional.

A larger down payment reduces the amount financed, which lowers both the payment and the total interest, and — per FCAC — reduces the risk of negative equity because less is owed relative to the vehicle’s value from day one. On a CAD 45,000 vehicle at 6.66% over 60 months, raising the down payment from CAD 5,000 to CAD 10,000 cuts the monthly payment by about CAD 98 and total interest by about CAD 900.

Per FCAC, the disclosed total cost of borrowing and the annual rate allow a like-for-like comparison — the monthly payment alone can hide a longer term. Comparing the total of payments on the same amount financed shows the true difference: a lower payment over 84 months frequently costs thousands more than a higher payment over 60. The calculator’s Compare tab puts two offers side by side on this basis.

Most Canadian car loans are secured, so on default the lender can repossess the vehicle under the security agreement and provincial law. Repossession and sale may not clear the debt — if the sale proceeds are less than the balance, the shortfall can remain owing, and the default is reported to the credit bureaus. Per FCAC, contacting the lender early when payments become difficult opens options such as payment deferrals or term changes.

Because most car loans are secured, an unpaid loan leaves a registered lien on the vehicle in the provincial personal property registry. A vehicle bought privately with an undischarged lien can be repossessed from the new owner if the original loan goes unpaid. A registry search in the relevant province (or a vehicle history report that includes lien data) confirms whether a vehicle is clear before purchase.