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Financing a car? This shows the monthly payment and the total interest before you agree to anything at the dealership. Enter the car price, any deposit or part-exchange value, the interest rate and the term in years. It nets the deposit off the price, then spreads the rest over the term as equal monthly payments, reporting both the instalment and the lifetime interest. Use it to compare finance offers, test whether a longer term really helps, or see how much a bigger deposit trims the cost.
A standard repayment estimate. It does not include fees, balloon payments or dealer add-ons.
How it works
- Enter the car price and subtract any cash deposit or trade-in value to find the amount actually financed.
- Add the annual interest rate and the loan term in years.
- The payment is set by amortisation so the balance reaches zero on the last instalment.
- Each payment covers the interest on the outstanding balance first, with the rest reducing what you owe.
- Total interest is every payment summed, minus the amount you borrowed.
payment = P x i / (1 - (1 + i)^-n), where P is price minus deposit
The amount financed is the car price less any deposit or trade-in. The monthly rate is the annual rate divided by twelve, and the number of payments is the term in years times twelve. The amortisation formula sets a level payment that clears the balance exactly on the final instalment. Total interest is every payment added up, minus the amount borrowed.
- P
- amount financed, price minus deposit
- i
- monthly rate, annual rate divided by 12
- n
- number of monthly payments
Car finance reference points
| Typical new-car APR, good credit | 5 to 9% | varies with lender and term |
| Common loan term | 3 to 5 years | 36 to 60 months |
| Suggested deposit | ≈ 10% | lowers payment and interest |
| PCP final balloon | often 30 to 50% | of the car value, deferred |
Worked example
A 20,000 car, no deposit, 6 percent over 5 years: about 386.66 a month. Across 60 payments that is roughly 23,199 repaid, so around 3,199 is interest. Put down a 2,000 deposit and both the monthly figure and the interest drop in proportion.
Key facts
- A longer term cuts the monthly payment but raises the total interest, since the balance is owed for longer.
- Early payments are mostly interest; the share going to capital grows as the balance falls.
- A deposit reduces the amount financed, so it lowers both the monthly figure and the lifetime interest.
- APR usually sits a little above the flat interest rate because it folds in certain fees.
Tips
- Compare offers on total cost over the term, not just the monthly payment, which a longer term can flatter.
- Put down the largest deposit you sensibly can, as it is the simplest lever on what the car costs overall.
- Ask whether early settlement is allowed without penalty, so you can clear the loan if your finances improve.
- Budget insurance, road tax, servicing and fuel separately, since the finance figure ignores all of them.
Monthly payment and interest on 20,000 financed
| Rate and term | Monthly | Total interest |
|---|---|---|
| 4% over 5 years | 368.31 | 2,099 |
| 6% over 5 years | 386.66 | 3,199 |
| 8% over 5 years | 405.53 | 4,332 |
| 6% over 7 years | 292.19 | 4,544 |
Frequently asked questions
Is APR the same as the interest rate?+
Closely related, but APR also folds in certain fees, so it usually sits a touch above the headline rate. For the most accurate monthly figure, enter the interest rate the lender actually quotes.
Is a bigger deposit worth it?+
Usually. A larger deposit cuts the amount financed, which lowers both the monthly payment and the total interest. It is one of the simplest levers for reducing what the car costs overall.
What about PCP and balloon payments?+
This models a standard repayment loan that clears in full. PCP deals defer a large final balloon payment, so their monthly figure is lower but a lump sum remains at the end, which this does not show.
Does it include insurance or road tax?+
No. It covers the finance only. Insurance, road tax, servicing, fuel and any dealer add-ons sit on top and should be budgeted separately.
Last updated: 2026
This is an estimate for general guidance, not financial, tax, legal or medical advice. Figures can change and individual circumstances vary. Always confirm with the official sources listed before making decisions.
- This is general information, not financial advice.
- A standard repayment estimate; it excludes fees, balloon payments and dealer add-ons.
- Assumes a fixed rate for the whole term.
Reviewed by Vikas Dulgunde.