Car Loan Calculator Table of Contents
- How to use the Car Loan calculator
- Car Loan Repayment and Interest Formula
- Car Loan Calculator example
- Car Loan Calculator FAQs
- More information about Car Loans
How to use the Car Loan calculator
To use the car loan calculator, you’ll need to enter some details about your loan. These are explained below:
- Vehicle Purchase Price - The value of the vehicle you wish to buy. Car loans are secured by the vehicle you purchase, and this amount will be relative to the base loan amount for your car finance.
- Initial Deposit / Trade-In Amount - The deposit amount put toward the vehicle during the purchase, or the amount you are offered when trading in your current vehicle. The final loan amount (minus any fees) is calculated by subtracting the deposit or trade-in amount from the vehicle purchase price.
- Interest Rate - This is the fixed interest rate the lender will apply to your car loan, and is used to calculate both the total amount of interest you will pay over the loan period and your scheduled repayment amount.
- Loan Term - The length of your car loan as dictated by your loan agreement. The loan term is important as it will allow you to accurately calculate your monthly, fortnightly, or weekly payments through an Annual Percentage Rate (APR) calculation. The shorter your loan term, the higher your scheduled repayments will be.
- Establishment Fees - Any upfront fees charged by the lender when creating the secured car loan agreement. Establishment fees are included in the calculation for your repayments to provide a more accurate total loan amount.
- Loan Amount - The amount of money you will be taking out under a car loan agreement, including any fees, and discounting any deposit or trade-in amount.
Once you have filled in your car loan details, simply 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.
Car Loan Repayment and Interest Formula
The car loan calculator uses what is called an amortisation calculation. Amortisation is best understood as the way you will gradually repay your loan amount over time. For example, when you make your first repayment on your car loan, a greater portion of the amount will go toward repaying the interest. As you continue to meet your repayments, the portion of interest paid on each amount will decrease, and the portion paid on your principal amount will increase.
Car loans are generally secured by the vehicle, and offered for a fixed rate over a fixed term. Calculating your repayments this way will not only give a more complete representation of repayments, but also allow you to determine the amount of interest you will pay over the term - or save if you are able to repay the loan early.
When expressed a mathematical formula, calculating your car loan repayments can seem somewhat complex. Don’t be concerned! Once you understand how amortisation works and the interest is calculated on a loan amount over time, you should be able to make the calculations on your own.
The simple formula for calculating Loan Repayments is: Loan Amount / Discount Factor
The complexity of the calculation is in determining the discount factor, which is calculated by dividing the interest rate of your loan by the number of payments per year (12 for monthly, 26 for fortnightly, or 52 for weekly) to first obtain the Periodic Interest Rate.
The formula is expressed as: (((1 + i) ^n) - 1) / (i (1 + i)^n)
- n = the number of repayments
- i = the annual interest rate
Car Loan Calculator example
In the example below, we’ll look at an individual wanting to purchase a $30,000 vehicle. They don’t provide a deposit, however they do trade their current vehicle in to the value of $10,000. Accounting for this, their car loan is $20,000, and they agree to a 7.5% fixed interest rate and a repayment term of 5 years.
- n = 60 (12 repayments per year for 5 years)
- i = 0.00625 (where the interest rate (7.5%) is divided by the number of annual payments (12) to provide a decimal representation of the interest rate)
- Using the discount factor formula above, we can calculate the discount factor: ((((1+0.00625)^60) - 1) / (0.00625(1+0.00625)^60)) = 49.9053
- The discount factor is then calculated as 49.9053
- We then take our loan amount ($20,000) and apply the Loan Repayment Formula, dividing the loan amount by the discount factor. This will provide your monthly repayments: 20,000 / 49.9053 = 400.759
- We then round this figure out to a double-digit decimal amount. Your monthly repayments on this loan will be $400.76
If you want to quickly calculate your repayments without creating your own spreadsheet with the above calculations, you can use our free car loan calculator.
Car Loan Calculator FAQs
To qualify for a car loan in Australia, you will need to be over the age of 18, a permanent resident or citizen of Australia, able to verify that you earn a steady income, and most importantly prove your ability to repay the car loan amount.
Secured car loans will generally use fixed interest rates offered between 5.00% and 29.90%. You can get the best interest rates on a car loan by purchasing the vehicle from a franchise or dealership, however you are still able to obtain reasonably low rates if you wish to purchase the vehicle through a private sale.
Yes, you can get a car loan with bad credit. Bad Credit Car Loans are offered by non-bank lenders and will have higher interest rates than standard car loans. You will still need to prove your ability to meet repayments, and it is very likely that you will be asked to provide extensive supporting documentation to the lender.
The average amount for a car loan in Australia is $30,000. Most lenders will approve a secured car loan application for anywhere between $5,000 and $100,000. The amount you are able to gain approval for will depend on your personal borrowing profile, which will be assessed according to your income and credit rating.
More information about Car Loans
If you’d like to learn more about car loans in Australia, you can choose from any of the specialised guides below.