What would my car payment be?
Sales tax on the right base for your province, the trade-in applied where the province allows it, and the payment, interest and total cost that follow.
Before tax and before the fees on the bill of sale.
The lines below the price. They are taxed too.
Rolls into the new loan. Negative equity is how a car loan gets out of hand.
A longer term lowers the payment and raises the total cost.
Monthly payment
$737.20
financing $36,790 over 60 months, costing $7,442 in interest.
- Amount financed
- $36,790
- Monthly payment
- $737.20
- Total interest
- $7,442
- Total cost
- $49,232
| Vehicle price | $38,000 |
|---|---|
| Fees | $1,800 |
| Taxed on | $39,800 |
| Sales tax at 5.000% GST | $1,990 |
| Total price | $41,790 |
| Down payment | - $5,000 |
| Amount financed | $36,790 |
In this province a trade-in comes off the price before sales tax is charged, so trading in rather than selling privately saves you the tax on its value. Alberta charges GST only, with no provincial sales tax on a vehicle.
What tax is actually charged on
Sales tax is charged on the price plus the freight, administration and licensing lines on the bill of sale, not on the advertised price alone. Those lines commonly add well over a thousand dollars, and they are taxable.
Whether a trade-in comes off before tax is charged is a provincial rule rather than a national one, and it is worth real money: on a $15,000 trade-in in a thirteen-per-cent province the difference is nearly two thousand dollars. That rule travels with the province here rather than being assumed.
Negative equity, and how a car loan gets out of hand
If you still owe more on your trade-in than it is worth, the difference does not disappear. It rolls into the new loan, so you begin the next car already owing more than it is worth, and the problem compounds with each trade. The field is on this page because it is the single most common way a manageable car payment becomes an unmanageable one.
A longer term is not a cheaper car
Stretching a loan from sixty months to eighty-four lowers the payment and raises the total cost, and it keeps you in negative equity for longer, because the car depreciates faster than the loan amortizes. Change the term above and watch the payment and the total interest move in opposite directions.
Buying is not the cost of owning
Fuel, insurance, maintenance and tyres often come to as much as the payment. A car that fits your budget on the payment alone may not fit it at all. The can I afford it calculator takes running costs alongside the payment for that reason.
What this assumes
- Monthly compounding
- The consumer credit convention, which is what a car loan uses.
- The rate is what you were quoted
- A manufacturer's promotional rate is often offered in place of a cash rebate rather than alongside it, so the low rate and the discount may not be available together. Compare the total cost of both.
- No luxury tax and no provincial surtax on an expensive vehicle
- The federal luxury tax applies above $100,000, and British Columbia's provincial rate rises on more expensive vehicles. Neither is modelled here, so the tax shown understates it at a high price.
Sources
- GST/HST calculator and rates · Canada Revenue Agency · checked