Plot No. 20 · Money & Finance
Car Loan Calculator
Work out the monthly payment on a car loan from the vehicle price, your deposit, the APR and the term in months. The loan is the price minus your deposit, and the monthly payment uses the standard amortising formula so each payment covers interest plus a slice of the balance.
This assumes a fixed-rate repayment loan with equal monthly payments and no fees. Dealer finance such as PCP works differently and may leave a final balloon payment.
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How the car loan payment is worked out
This calculator is built for buying a car with a deposit. It first subtracts your deposit from the vehicle price to get the amount you actually borrow, then works out a fixed monthly payment that clears that balance over the term. The payment formula is loan times the monthly rate, divided by one minus one plus the monthly rate to the power of minus the number of months, where the monthly rate is the APR divided by 12.
Because interest is charged only on the outstanding balance, every payment is part interest and part capital. Early payments are mostly interest and later ones mostly capital. The total interest is the sum of all payments minus the loan, and the total cost adds your deposit back on so you see the full amount the car costs you out the door.
How to use the car loan calculator
- Enter the vehicle price, then the cash deposit you plan to put down.
- Enter the APR the dealer or lender has quoted and the term in months.
- Read off the monthly payment, total interest and total cost, then try a bigger deposit or shorter term to see the interest fall.
Worked examples
Standard dealer finance
Inputs: 20,000 car, 2,000 deposit, 7.9% APR, 60 months
Result: You borrow 18,000 and pay about 364.08 a month, with roughly 3,844.80 in interest and a total cost of about 23,844.80 including the deposit.
Bigger deposit, shorter term
Inputs: 20,000 car, 5,000 deposit, 7.9% APR, 36 months
Result: You borrow 15,000 and the monthly payment rises to about 469, but total interest drops to around 1,891 because you repay faster on a smaller balance.
Limitations and common mistakes
Edge cases and limitations
- It assumes a fixed-rate repayment loan with equal monthly payments and no arrangement or admin fees.
- It does not model PCP or lease deals, which keep a large balloon payment at the end and so have lower monthly payments.
- APR is treated as a simple monthly rate of APR divided by 12, which is the common quoting convention rather than a daily compounding figure.
Common mistakes
- Comparing only the monthly payment between deals and ignoring the term, since a longer term lowers the monthly figure but raises total interest.
- Forgetting that the deposit is money you have also spent, so the true cost of the car is the total payments plus the deposit, not just the loan.
Frequently asked questions
How is the car loan monthly payment calculated?
First the deposit is subtracted from the vehicle price to get the loan amount. The monthly payment is then loan times the monthly rate, divided by one minus (one plus the monthly rate) to the power of minus the number of months. On a 20,000 car with a 2,000 deposit at 7.9% APR over 60 months, the loan is 18,000 and the payment is about 364.
Does a bigger deposit reduce the monthly payment?
Yes. The deposit comes straight off the amount you borrow, so a larger deposit means a smaller loan and a lower monthly payment. It also cuts the total interest, because interest is only charged on the borrowed balance, not the deposit.
How is this different from a generic loan calculator?
The maths is the same amortising formula, but a car loan is framed around a purchase with a deposit. Here you enter the vehicle price and deposit separately, and the total cost includes your deposit so you see the full out-the-door figure.
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