Car Loan Calculator
Calculate monthly car loan payments, total interest paid, and total cost of borrowing. Compare loan terms and deposit amounts to find the best deal.
Last updated: March 2026
Monthly Payment
£$292.39
Total Repayment
£$14,035
Total Interest
£$2,035
Total Cost (inc. deposit)
£$17,035
How You Compare
Your car finance rate is better than 50% of UK car finance.
Industry typical: 4.9-12.9% APR
Source: FLA Motor Finance Data 2025
💡 What This Means
- 📊 Total interest of £2035 is typical for car finance. Rates of 4.9-7.9% are competitive in the current market.
- 📊 Monthly payments of £292 are manageable. Remember to budget for insurance, road tax, and maintenance on top.
- 💡 Paying cash avoids £2035 in interest — but check if your savings earn more interest than the loan costs before deciding.
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What is Car Loan?
A car loan (or hire purchase) finances the purchase of a vehicle by spreading the cost over monthly payments plus interest. Understanding the total cost of borrowing — not just the monthly payment — is essential for making a financially sound vehicle purchase. Compare with total ownership costs using the Vehicle Cost Calculator.
The Formula
Monthly Payment = [Loan Amount × Monthly Rate × (1 + Monthly Rate)^Months] ÷ [(1 + Monthly Rate)^Months − 1]
Monthly Rate = Annual Rate ÷ 12. Total Interest = (Monthly Payment × Number of Months) − Loan Amount.
Worked Example
A £15,000 car with a £3,000 deposit, leaving a £12,000 loan at 6.9% APR over 5 years (60 months).
- Loan amount = £15,000 − £3,000 = £12,000
- Monthly rate = 6.9% ÷ 12 = 0.575%
- Monthly payment = £237
- Total repaid = £237 × 60 = £14,220
- Total interest = £14,220 − £12,000 = £2,220
📌 Monthly payments of £237 over 5 years, with £2,220 in total interest — 18.5% of the loan amount. The car actually costs £17,220 including interest and deposit.
Why This Matters
Total cost awareness
Dealers emphasise monthly payments ("only £199/month!") to distract from the total cost. A lower monthly payment over a longer term means more interest. Always calculate the total amount repaid before committing.
Depreciation overlap
Cars depreciate 15-35% in year one and 50-60% over 3 years. If your loan term exceeds the car's depreciation curve, you may owe more than the car is worth (negative equity). This creates problems if you need to sell or trade in early.
Common Mistakes
❌ Extending the term to reduce payments
A 7-year loan reduces monthly payments but you pay interest for 2 extra years. On a £12,000 loan at 6.9%, extending from 5 to 7 years saves £45/month but adds £1,100 in total interest.
❌ Not comparing finance types
Hire Purchase (HP), Personal Contract Purchase (PCP), and personal loans have different structures and total costs. PCP has lower monthly payments but you don't own the car without a final balloon payment.
Industry Benchmarks
| Category | Good | Average | Poor |
|---|---|---|---|
| APR | Below 5% | 5-9% | Above 10% |
| Total interest as % of loan | Below 15% | 15-25% | Above 30% |
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