Car Loan Calculator

How a car loan payment is calculated

A car loan uses the same standard amortisation math as a mortgage or personal loan. The calculator takes the loan principal (the car price minus the down payment) and applies the monthly interest rate over the term to produce the fixed monthly payment. Each payment covers interest accrued on the outstanding balance plus a chunk of principal; the split shifts over time as the balance falls, but the headline payment amount stays constant for a fixed-rate loan.

The primary output is the fixed monthly payment. The secondary rows break this into the loan principal, the total paid across the full term, the portion of that total that is interest, and that interest as a share of the amount borrowed, a figure that stays the same in every currency at a given rate and term.

How the inputs move the answer

The loan principal, car price minus down payment, has a directly proportional effect on the monthly payment. Doubling the principal doubles the payment at any given rate and term, which is why the price and down payment fields act through a single number rather than two. On a five-year term, one percentage point on the rate adds between about 1.9% and 2.6% to the monthly payment, across the 0% to 30% span the rate field accepts. The effect shrinks as the rate rises rather than growing: 2.56% at the bottom of that span, 1.93% at the top. The effect on total interest depends heavily on the starting rate: from a 1% rate, one extra point roughly doubles the interest bill; from 18%, it adds about 6%. Term length pulls in two directions at once: at any rate above zero a longer term lowers the monthly payment and raises total interest. At a 0% rate the total interest is nil at every term.

How the down payment changes the calculation

The down payment reduces the loan principal one-for-one. The payment is proportional to the principal, not to the down payment, so the size of the effect depends on what share of the principal the down payment represents. Raising the down payment by a tenth lowers the payment by a tenth of that share: on a down payment worth a ninth of the amount borrowed, a little over 1%. The down payment field can be set to zero to model fully financed scenarios, or raised to compare different cash-versus-finance splits on the same vehicle.

How term length changes total cost

The same loan amount and rate, run over different terms, produce materially different total cost. A loan amortised over 36 months carries a higher monthly payment but a smaller total interest charge than the same loan over 60 or 84 months, because there are fewer months over which interest accrues. Re-running the calculator at multiple term lengths makes the trade-off visible in concrete figures.

Zero-rate and subsidised dealer finance

At a 0% rate the amortisation formula degenerates and the payment is simply the principal divided by the number of months, with no interest at all. Subsidised dealer finance often takes this form. The total paid then equals the amount borrowed and the interest share row reads 0.00%, which is the quickest way to confirm a quoted 0% deal has been entered as intended.

What the calculator does not include

Insurance, fuel, maintenance, registration or licensing fees, depreciation, and any purchase taxes (sales tax, VAT or GST depending on the market) are all costs of owning a car, but none of them appear in the loan calculation. The figures here cover only the financing of the purchase price net of down payment. The model also assumes the loan amortises to zero over the term. Balloon, PCP and lease-purchase agreements leave a large optional final payment outstanding, which changes both the monthly figure and the total, and they are out of scope here. The down payment itself is part of the buyer's outlay but not part of the loan, so the full cash outlay is the total paid figure plus the down payment.