How car loan interest works
Interest is worked out each month on the balance you still owe, at one twelfth of the annual rate. Early payments are mostly interest; as the balance falls, more of each payment repays the loan.
Lenders may calculate interest differently (some charge it daily), so your actual interest can differ slightly.
Worked example
Borrowing £18,000 for a £20,000 car at 8% over 48 months costs £3,092.76 in interest, £1,296.28 of it in the first year.
A £5,000 deposit instead of £2,000 cuts the interest to £2,577.30. Stretching to 60 months lowers the payment to £364.98 but raises the interest to £3,898.51.
Ways to pay less interest
A bigger deposit, a shorter term and a lower APR all reduce the interest. Some dealers offer low or 0% APR deals, so compare the total amount payable, not just the monthly payment.
Inputs for the car loan interest calculator
Car price
The price of the car.
Deposit
What you're paying upfront. A bigger deposit means borrowing less and paying less interest.
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.
Term
How many months you'll repay over. A longer term means paying interest for longer.
CALCULATOR QUESTIONS
Car loan interest calculator questions
How much interest will I pay on car finance?
Enter your details above. For example, £18,000 at 8% over 48 months costs £3,092.76 in interest.
Does a bigger deposit save interest?
Yes, because you borrow less. In the example, £3,000 more deposit saves £515.46 in interest.
Is a longer car loan more expensive?
Usually. The monthly payment is lower but you pay interest for longer.
What's the difference between the interest rate and the APR?
The interest rate is what's charged on the balance. The APR also includes most compulsory fees, so it's better for comparing the overall cost of different loans.