Car Loan Calculator
Work out your monthly repayment, total interest and total cost on a fixed-rate car loan, enter the amount, APR and term to see the numbers instantly.
Estimate only. This is an estimate based on a representative APR and does not constitute a loan offer. Always check the exact APR, fees and terms in your finance agreement before signing.
Enter your loan details
Your monthly payment, total interest and total cost appear here as you type.
How a car loan is calculated
A car loan is a standard amortising loan: each fixed monthly payment covers that month's interest plus a portion of the amount borrowed, so the balance reaches zero at the end of the term. The monthly rate is your APR divided by 12. A lower APR or a shorter term both reduce the total interest you pay, but a shorter term means higher monthly payments. This calculator assumes a fixed rate for the whole term and doesn't include arrangement fees some lenders charge.
How a car loan repayment is worked out
A personal car loan is unsecured borrowing: the money is yours, you buy the car outright, and the lender has no claim on it. The repayment uses the standard annuity formula, M = P x r / (1 - (1 + r)^-n), where P is the amount borrowed, r is the APR divided by 1200 and n is the term in months. The payment is fixed for the whole term.
Every payment splits between interest and capital. Early on more goes to interest because the balance is at its highest; later the balance is smaller so more of each payment reduces it. That is why overpaying early saves more than overpaying late.
Two numbers set the total cost: the APR and the term. This is worth internalising because dealers and comparison tables lead on the monthly payment, which can be lowered by stretching the term while the total cost rises.
The term costs more than the rate
On £12,000 at 9.9%, a 60-month loan costs £254.37 a month and £3,262.20 in interest. The same loan over 36 months costs £386.64 a month and £1,919.04. Shortening the term by two years saves £1,343.16.
Now compare that against the rate. Keeping the 60-month term but paying 12.9% instead of 9.9%, three whole percentage points worse, costs £4,345.20 in interest. That is £1,083 more.
So on this loan, two years of term is worth more than three points of APR. People shop hard on rate and accept whatever term makes the monthly payment comfortable, which is the wrong way round. Borrow over the shortest term you can genuinely afford, then shop the rate.
The other reason term matters: a car depreciates whether or not you have finished paying for it. A seven-year loan on a five-year car leaves you making payments on something that is worth very little and may not still be running.
Loan, HP or PCP
A personal loan makes you the outright owner from day one. You can sell the car whenever you like, there are no mileage limits, no condition charges and no option-to-purchase fee. You can also buy privately, which is usually cheaper than a dealer forecourt and where dealer finance is not available.
Hire Purchase is secured on the car. The finance company owns it until the last payment, so approval is often easier and the APR lower, but you cannot sell it while money is owed. PCP defers a large balloon payment to the end, cutting the monthly cost but adding mileage limits and leaving you owning nothing unless you pay the balloon.
The trade-off is genuine rather than obvious. If your credit file is strong, a personal loan is frequently the cheapest total cost and the most flexible. If it is thin or impaired, secured finance may be the only reasonable option or the only affordable rate.
One consumer-protection difference is worth knowing. Section 75 of the Consumer Credit Act covers credit card purchases between £100 and £30,000, and HP and PCP agreements give you rights against the finance company if the car is faulty. A personal loan is separate from the purchase, so if the car turns out to be a problem, your claim is against the seller alone while the loan carries on regardless.
APR, representative APR, and what you will actually be offered
The advertised figure is normally a representative APR, which only 51% of accepted applicants have to receive. The rest are offered something higher, and you generally find out at the end of the application rather than the start.
Use eligibility checkers that run a soft search first. They show your likely rate without leaving a hard footprint, and several full applications in quick succession make your file look like someone urgently hunting for credit, which makes the next lender warier.
Watch for arrangement fees and whether they are inside the APR. Under UK rules the APR must include compulsory fees, so it is the right basis for comparing, but always confirm the total amount payable as well.
Credit unions are consistently overlooked. Their rates are capped by law and are frequently competitive for smaller loans, especially for borrowers who would not get a lender's headline rate.
Overpaying and settling early
A regulated loan can be settled early at any time under section 94 of the Consumer Credit Act 1974, with a statutory rebate of interest you have not yet incurred. The lender may add up to 58 days of interest when calculating the figure on agreements over twelve months, so the saving is a little smaller than the raw balance suggests.
Partial overpayments are also allowed. Ask the lender in writing whether an overpayment reduces the term or the monthly payment, because the two produce very different savings: reducing the term cuts interest substantially, reducing the payment barely moves it.
Because interest is front-loaded, overpaying in year one is worth considerably more than the same amount in year four. If you expect a bonus or a windfall early in the term, putting it against the loan is usually the highest-return use of it short of clearing higher-rate debt.
If you have credit card debt at 20% or more, clear that before overpaying a 9.9% car loan. It is the same pound doing twice the work.
Worked example: £12,000 borrowed at 9.9%
The same amount at the same rate over two different terms, and the same term at a worse rate, so the two levers can be compared directly. These are the exact figures this calculator returns.
| Amount borrowed | £12,000.00 |
|---|---|
| APR | 9.9% |
| Term | 60 months |
| Monthly payment | £254.37 |
| Total interest | £3,262.20 |
| Total repaid | £15,262.20 |
| Same loan over 36 months, monthly | £386.64 |
| Same loan over 36 months, total interest | £1,919.04 |
| Same 60-month term at 12.9%, monthly | £272.42 |
| Same 60-month term at 12.9%, total interest | £4,345.20 |
Cutting the term from 60 months to 36 saves £1,343.16 in interest. Paying three percentage points more on the original term costs £1,083.00. On this loan the term is the bigger lever, which is the reverse of how most people shop: hard on the rate, relaxed about the term because it sets the monthly figure.
Frequently asked questions
- How is a car loan monthly payment calculated?
- With the standard annuity formula: M = P x r / (1 - (1 + r)^-n), where P is the amount borrowed, r is the APR divided by 1200 and n is the term in months. The payment stays the same throughout, but its split changes: early payments are mostly interest because the balance is highest, and later ones are mostly capital. On £12,000 at 9.9% over 60 months the payment is £254.37.
- Is it better to take a shorter car loan term?
- Almost always, if you can afford the payment. On £12,000 at 9.9%, going from 60 months to 36 raises the monthly cost from £254.37 to £386.64 but cuts total interest from £3,262.20 to £1,919.04, saving £1,343.16. For comparison, paying three percentage points more APR over the original 60 months costs £1,083. The term is the bigger lever and gets the least attention.
- Is a car loan cheaper than HP or PCP?
- It depends on your credit file. HP and PCP are secured on the car, so lenders take less risk and can offer lower APRs, particularly to applicants with thinner files. A personal loan usually wins on flexibility: you own the car outright from day one, can sell it whenever you like, and face no mileage limits, condition charges or option-to-purchase fee. Compare total amount payable, not the monthly payment.
- What is a representative APR?
- The advertised rate that only 51% of accepted applicants have to be given. The rest are offered something higher after the credit check, which is often the first time they see it. Use soft-search eligibility checkers before applying, because several full applications in a short period leave hard footprints that make your file look like urgent credit-seeking and make the next lender more cautious.
- Can I pay off a car loan early?
- Yes. Section 94 of the Consumer Credit Act 1974 gives you the right to settle a regulated agreement at any time, with a statutory rebate of interest not yet incurred. The lender may add up to 58 days of interest when calculating the settlement on agreements longer than twelve months, so the saving is slightly less than the outstanding balance implies. Partial overpayments are allowed too.
- Does overpaying a car loan reduce the term or the payment?
- That depends on the lender, and it matters a great deal, so ask in writing. Reducing the term cuts total interest substantially because the debt is outstanding for less time. Reducing the monthly payment while keeping the term barely changes the interest at all. Because interest is front-loaded, an overpayment in year one is worth far more than the same sum in year four.
- Should I get a car loan or use savings?
- Compare the loan APR against what your savings earn after tax. Borrowing at 9.9% while savings earn 4% costs you roughly 6% a year on the amount borrowed, so paying cash is usually better. The exceptions are keeping an emergency fund intact, which is worth more than a small rate differential, and genuine 0% dealer offers where the cash price is not inflated to pay for the finance.
- Can I get a car loan with bad credit?
- Usually, but at rates that change the arithmetic considerably, and at that point secured finance such as HP may be both easier to obtain and cheaper because the lender's risk is lower. Credit unions are worth trying and are frequently overlooked, since their rates are capped by law and are often competitive for smaller amounts. Check eligibility with soft searches rather than making multiple full applications.
Also known as: car loan repayment calculator · car loan calculator UK · car loan payment calculator · auto loan payment calculator · car loan interest calculator · car finance calculator · personal loan calculator UK
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