Car Loan Calculator
Calculate your monthly car payment, total interest and full loan cost instantly. Enter your vehicle price, down payment, trade-in value and interest rate for a complete breakdown including a yearly repayment schedule.
How to Calculate Car Loan Payments
Working out your monthly car loan payment comes down to three numbers: the amount you're borrowing, the annual interest rate (APR), and the loan term in months. Once you have those, the maths takes care of itself — but it helps to understand what's actually happening to your money each month.
Your monthly payment is made up of two parts: a portion that reduces the outstanding loan balance (the principal), and a portion that covers the interest charged for that month. In the early months of a loan, more of your payment goes toward interest. By the final months, most of it goes toward the principal. This is called an amortising loan.
Example: £15,000 at 6.9% APR over 36 months → monthly payment = £462.96
You don't need to run these calculations manually — that's exactly what our Car Loan Calculator above is for. But knowing the formula helps you understand why a higher interest rate or longer term can dramatically change your total cost.
What Is APR and Why Does It Matter?
APR stands for Annual Percentage Rate. It's the true yearly cost of borrowing, expressed as a percentage. When comparing car loan offers, always compare APRs — not just the headline interest rate — because APR includes any fees charged by the lender, giving you a more accurate picture of what the loan actually costs.
Even a small difference in APR adds up significantly over the life of a loan. Here's how APR affects the total cost of a £20,000 car loan over 48 months:
| APR | Monthly Payment | Total Repaid | Total Interest |
|---|---|---|---|
| 4% | £451.58 | £21,675.84 | £1,675.84 |
| 7% | £478.96 | £22,990.08 | £2,990.08 |
| 10% | £507.25 | £24,348.00 | £4,348.00 |
| 15% | £556.61 | £26,717.28 | £6,717.28 |
| 20% | £608.65 | £29,215.20 | £9,215.20 |
A borrower paying 20% APR on the same loan pays over £7,500 more in interest than one paying 4%. That's why shopping around for the best APR — even by a few percentage points — is one of the most impactful things you can do before signing a car finance agreement.
Loan Term: How Many Months Should You Choose?
The loan term is how long you have to repay the loan. Common terms are 24, 36, 48, 60, 72 and 84 months. A longer term means lower monthly payments — but significantly more interest overall, and a greater risk of being upside down on your loan (owing more than the car is worth).
| Loan Term | Monthly Payment | Total Interest | Best For |
|---|---|---|---|
| 24 months | Highest | Lowest | Paying off quickly, lowest overall cost |
| 36 months | High | Low | Good balance of payment and cost |
| 48 months | Moderate | Moderate | Most popular term |
| 60 months | Lower | Higher | Manageable payments on larger loans |
| 72–84 months | Lowest | Highest | Use with caution — high total cost |
Financial advisers generally recommend keeping your car loan term to 48 months or under where possible. Loans of 72 or 84 months can feel affordable month to month, but cars depreciate quickly — by the time the loan ends, you may owe more than the vehicle is worth if you needed to sell it.
How to Reduce Your Monthly Car Payment
If the monthly payment from the calculator feels too high, there are several practical levers you can pull:
- Increase your deposit. A larger upfront payment reduces the loan amount directly, lowering both your monthly payment and total interest. Even an extra £500–£1,000 deposit makes a meaningful difference.
- Negotiate the purchase price. The lower the car price, the lower the loan. A £1,000 reduction in purchase price saves you more than £1,000 in total once interest is factored in.
- Shop around for a better APR. Getting pre-approved by your bank or a credit union before visiting a dealership gives you a rate to benchmark against. Dealership finance is often convenient but not always the cheapest.
- Improve your credit score first. If your credit score is borderline, waiting a few months to improve it before applying can secure you a meaningfully lower APR and save hundreds over the life of the loan.
- Choose a shorter-term loan on a lower-priced car. A cheaper car with a 36-month loan often costs less overall than an expensive car stretched over 84 months — even if the monthly payments look similar.
Car Loan Worked Example
Here's a full worked example to show exactly how the numbers play out:
Monthly interest rate: 0.658% (7.9% ÷ 12)
Monthly payment: £363.78
Total repaid: £17,461.44
Total interest paid: £2,461.44
Interest as % of loan: 16.4%
In this example, the real cost of the car isn't £18,000 — it's £20,461.44 once you include the deposit and total interest. This is why it's always worth calculating the full cost of a loan before committing, not just the monthly payment.
What You Need to Calculate a Car Loan
FAQs
How do I calculate monthly payments on a car loan?
Multiply the loan amount by the monthly interest rate (APR divided by 12), then apply the standard amortisation formula. In practice, enter the car price, deposit, APR and term into the calculator above and it does this instantly — no maths required.
What is a good APR for a car loan in 2026?
For borrowers with good credit, car loan APRs in 2026 typically range from 5% to 9% for new cars and 7% to 12% for used cars. Borrowers with excellent credit may qualify for rates below 5%. If you’re being offered above 15%, it’s worth checking your credit report and shopping around before accepting.
How do I calculate the total cost of a car loan?
Multiply your monthly payment by the number of months in the loan term, then add your deposit. This gives you the true total cost of the car. Our calculator shows this automatically under “Total Repayable” so you can see the real cost at a glance.
Is it better to put a larger deposit on a car loan?
Generally yes. A larger deposit reduces the loan amount, which lowers both your monthly payments and the total interest paid. It can also improve your chances of approval and potentially secure you a lower APR, since the lender is taking on less risk.
How do I figure out car loan payments for a used vehicle?
The calculation is identical to a new car — enter the vehicle price, deposit, APR and term. The key difference is that used car loans typically carry a higher APR than new car loans, so make sure you’re using the actual APR you’ve been offered rather than a new car rate.
What happens if I pay off my car loan early?
Paying off a car loan early reduces the total interest you pay, since interest is calculated on the outstanding balance. However, some lenders charge an early repayment fee — check your loan agreement before making overpayments. If there’s no penalty, extra payments whenever possible will save you money over the loan term.
What is the difference between a car loan and PCP or HP finance?
A traditional car loan gives you ownership of the vehicle from day one and you repay the full value plus interest. PCP (Personal Contract Purchase) and HP (Hire Purchase) are forms of finance where you don’t fully own the car until the end of the agreement. PCP typically has lower monthly payments but requires a final balloon payment to keep the car. Our calculator is designed for traditional car loans.
Is the Car Loan Calculator free to use?
Yes — completely free, no sign-up required. Enter your figures above and get instant results.