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Car Loan Calculator Words, Phrases and Terms to Know

 

A man on a laptop using a car loan calculator

When it comes to the words and phrases you might see in your online car loan calculator Canada has some terminology that could be new to you. Learn what these words mean so you can make sense of what your auto finance calculator tells you.

Vehicle Price

Use the slider or input the vehicle price into your car loan payment calculator. The price to use is the one you will pay after all rebates and discounts get applied.

Term Length/Loan Term

This is the amount of time for you to pay off your loan. Car loan terms in Canada usually range from one to eight years. The shorter your term, the larger your payments will be because you will pay off the money you borrowed faster. A longer term means smaller payments, but it is important to understand that you will pay more interest in the long run.

Credit

Credit means getting something now and paying for it later. So a car loan is a credit, because you get the car now and pay it off over time. If you have other credit products like a credit card, credit line or student loans, you have a credit score based on your credit repayment history. Your car loan payment calculator might include a spot for your credit score because it impacts your car loan interest rate.

Trade-In

If you already have a car, consider trading it in at the car dealer to lower the cost of buying a new car. The dealership calculates your vehicle’s trade-in value based on its age, condition, make and model.  (If you still owe money on the vehicle it will get added to your new vehicle’s price.) The trade-in value then gets applied to the vehicle price of the new car you want to buy. The Canadian Black Book site can help you estimate the value of your trade-in vehicle before you head to the dealership. However, keep in mind that it is an estimate only; the amount of money you get for your trade-in is up to the dealership.

Down Payment

Sometimes a Canadian car loan calculator includes a spot to add your down payment. A car loan down payment is a lump sum of money you use towards buying a car. A down payment lowers the amount of money you’ll need to borrow to purchase a car.

Payment Frequency

This is how often you’ll make your car loan payments. Your auto loan calculator might include a place to choose monthly, every-other-week, or weekly payments. Your payments are smaller the more often you make them. So if you pay your car loan weekly you’ll have four smaller payments instead of one larger monthly payment.

Sales Tax

The sales tax charged on cars depends on where you are in Canada. That’s because it’s different depending on the province or territory. If you see GST + PST (Goods & Services Tax + Provincial Sales Tax) or HST (Harmonized Sales Tax), these are sales taxes.

In Alberta, NWT, Yukon and Nunavut it’s just 5 percent. In Saskatchewan, you’ll pay 11 percent, and in British Columbia, you’ll pay 12 percent. In Manitoba and Ontario expect to pay 13 percent and if you buy a car in Quebec, PEI, Nova Scotia, New Brunswick or Newfoundland you’ll pay 15 percent sales tax.

Posted Annual Interest

This is also sometimes known as the simple rate. It’s the interest rate the lender advertises or “posts”. This rate is used to calculate the fee you pay to borrow money. It’s a percentage of the price of the car you’re buying. This is the rate to use in your car payment calculator.

Annual Percentage Rate (APR)

You might see the letters APR somewhere on the bottom of the screen of your auto loan calculator. This stands for Annual Percentage Rate, the annual interest rate you’re charged to borrow money to buy your car. It’s different from the posted annual interest rate because it includes the cost of any fees, taxes, or extra charges that come with buying a car.