Why the combined figure matters
Lenders assess affordability on the loan payment alone, but your budget has to cover insurance too. For a young driver the premium can exceed the finance payment.
Insurance is usually paid annually or monthly. Paying monthly often carries interest, so the true monthly cost can be higher than a twelfth of the annual premium.
Worked example
A £25,000 car with a £3,000 deposit at 7.5% over 60 months costs £440.83 a month. A £1,200 annual premium adds £100 a month, so the combined cost is £540.83.
Over the term the loan costs £26,450.09 and insurance costs £6,000, a total of £32,450.09 before fuel, servicing and tax.
Inputs for the car loan and insurance calculator
Vehicle price
The agreed price of the car.
Deposit
Cash or trade-in value paid upfront.
Interest rate (nominal)
The yearly rate before monthly compounding.
Term
How many months you will take to repay the loan.
Annual insurance premium
The yearly cost of comprehensive cover.
CALCULATOR QUESTIONS
Car loan insurance calculator questions
Should I include insurance in my car budget?
Yes. Lenders often ignore it, but it is a fixed monthly cost for as long as you own the car.
Is monthly insurance more expensive?
Often. Many insurers charge interest for monthly payments, so paying annually can be cheaper.
Does the loan cover insurance?
No. Unless you add GAP or payment protection, the loan covers the car only.
What if I change car mid-term?
The premium changes with the car. Tell your insurer before you switch to avoid a gap in cover.