How car finance payments are calculated
You borrow the car's price minus your deposit and repay it in equal monthly payments that include interest. This is how a car loan or hire purchase (HP) agreement is repaid.
Interest is worked out monthly at one twelfth of the annual rate. Lenders may calculate interest differently (some charge it daily), so your actual payments can differ slightly.
Worked example
A £20,000 car with a £2,000 deposit means borrowing £18,000. At 8% over 48 months, the monthly payment is £439.43, and you'd repay £21,092.76 in total, so the finance costs £3,092.76.
Car loan, HP or PCP?
With a personal car loan you own the car straight away. With hire purchase you own it once you've made the last payment. Both are repaid in full, which is what this calculator shows.
Personal contract purchase (PCP) works differently: monthly payments are lower because part of the cost is deferred to an optional final 'balloon' payment if you want to keep the car. This calculator doesn't cover PCP.
Inputs for the car finance calculator
Car price
The price of the car, including any extras you're financing.
Deposit
What you're paying upfront, including any part-exchange value.
Interest rate (per year)
The annual interest rate on your finance. The rate shown is only an example, so enter the rate from your quote. Interest is worked out monthly at one twelfth of the annual rate. Lenders may calculate interest differently (some charge it daily), so your actual payments can differ slightly.
Term
The length of the agreement in months. Car finance is often 24 to 60 months.
CALCULATOR QUESTIONS
Car finance calculator questions
How much will my car finance cost per month?
Enter the price, deposit, rate and term above. For example, borrowing £18,000 at 8% over 48 months costs £439.43 a month.
Does a bigger deposit lower my payments?
Yes. You borrow less, so both the monthly payment and the total interest fall.
Does this work for PCP deals?
No. PCP defers part of the price to an optional final payment, so its monthly payments are lower than a loan or HP for the same car.
When do I own the car?
With a car loan, straight away. With hire purchase, once you've made the final payment.