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.
1
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 data.
2
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 shows.
3
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%.
4
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 | $10,000 |
|---|---|
6% interest | $193.33 |
8% interest | $202.76 |
10% interest | $212.47 |
Car loan amount | $20,000 |
6% interest | $386.66 |
8% interest | $405.53 |
10% interest | $424.94 |
Car loan amount | $30,000 |
6% interest | $579.98 |
8% interest | $608.29 |
10% interest | $637.41 |
| 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.
Ready to compare car loans?
Get your best offers from multiple lenders. There's no obligation and checking your rates won't impact your credit score.
