Car Loan Calculator
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Loan Amount: $30,000
Establishment Fee: --
Total Interest Paid: --
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How to use the car finance calculator
To use the secured car finance calculator, you’ll need to enter some details about your loan. These are explained below.
Loan amount
This is how much you are borrowing with your car loan and is sometimes called the loan ‘principal’.
It’s often the same as the value of the car you’re buying. But if you’re contributing a deposit or trading in your old vehicle, you would deduct these from the vehicle purchase price to arrive at the loan amount.
On average, borrowers request a car loan amount of $44,547 for new vehicles, and $30,005 for used cars, according to Money.com.au data.
Loan term
This is the length of your car loan and is outlined in your finance agreement.
Your loan term is very important because your lender will use it to calculate your monthly, fortnightly, or weekly repayments.
The shorter your loan term, the higher your scheduled repayments will be but you’ll pay less in interest overall.
The vast majority of borrowers choose a five-year car loan term, analysis by Money.com.au shows.
Interest rate
This is the main cost of your car finance.
The interest rate applied to your car loan is used to calculate both the total amount of interest you will pay over the loan period and your regular repayment amount.
Car loan rates are usually fixed (they don’t change over the life of the loan) and usually start from around 6-7%.
Establishment fees
It’s also important to factor in any upfront fees charged by the lender on your car loan.
In many cases, establishment fees are bundled into your loan amount.
If that’s the case you are charged interest on them along with the loan principal.
Once you have filled in your car loan details, click ‘See My Repayments’ to view an estimated repayment amount.
You can then select monthly, fortnightly, or weekly repayments to see what your repayment amount will be at various frequencies.
Calculating your car loan based on the variables shown will also show you how much interest you will pay over the finance term.
And crucially, it will show you how much you could save if you are able to secure a lower interest rate and/or repay the loan early.
How is car loan interest calculated?
Your car loan repayments go toward paying down the amount you borrowed (the finance principal) AND the interest charged by the lender.
Lenders typically calculate car loan interest daily based on the current loan balance that day.
But they charge interest monthly (i.e. add it to your balance).
Here’s an example of how that works.
- Say you borrow $30,000 at a rate of 6% p.a. (per annum/year)
- That’s $30,000 (or whatever the the current balance is) x 0.06 = $1,800
- That’s divided by the 365 days in the year for the daily interest = $4.93
- The daily interest amounts for the current month are added together to arrive at your monthly interest charge.
Example of Monthly Car Loan Repayments
| Car loan amount | 6% interest | 8% interest | 10% interest |
|---|---|---|---|
$10,000 | $193.33 | $202.76 | $212.47 |
$20,000 | $386.66 | $405.53 | $424.94 |
$30,000 | $579.98 | $608.29 | $637.41 |
How does car loan interest work?
The car loan calculator uses what’s called an amortisation calculation.
Amortisation is best understood as the way you will gradually repay your loan amount over time.
For example, at the start of your car loan, you’re being charged interest on a larger amount (principal).
So a greater portion of your repayment will go toward repaying the interest charged.
As you continue to meet your repayments, the loan principal decreases. But your repayment amount stays the same over the life of the loan.
So the portion of your repayment covering the interest decreases over time.
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Car loan calculator FAQ
What is the interest rate for a car loan?
Interest on a car loan is the cost of borrowing money. It’s one of the ways lenders make money.
Unlike the interest charged on other products like home loans or credit cards, lenders usually tailor car finance interest rates to each borrower specifically.
Factors considered in the calculation can include:
- Whether it’s a secured or unsecured loan (secured car loans are usually cheaper)
- The age of the car: newer cars generally qualify for lower rates
- Whether the loan rate is fixed or variable (variable rate car loans are less common)
- Whether you buy the car at a dealership or through a private sale
- Your credit score: the higher it is the lower your interest rate is likely to be
- The lender you choose: it can pay (a lot) to compare options to find the lowest rate.
Interest on a personal loan is worked out be lenders in a similar way (i.e. based on risk).
How much can I borrow with a car loan?
Most lenders will approve a secured car loan application for anywhere between $5,000 and $150,000.
The amount you are able to borrow will depend on your personal borrowing profile, which will be calculated by the lender based on your income, expenses and credit rating.
What are the car finance repayment options?
You generally have the option to make your car loan repayments weekly, fortnightly or monthly, to suit your budget.
Some loans give you the flexibility to make extra repayments and repay the finance early. This can help you save on interest. Just watch out for any extra and early repayment fees.
With some loans, you will also have the option to make a balloon payment at the end of the loan term. This is a large, one-off repayment that reduces your regular repayment amount.