How to use our car finance calculator
You’ll need to enter the following details about your car loan when using our car finance calculator.
Interest rate
The interest rate on your car loan is used to calculate both your regular repayment amount and the total interest you’ll pay over the loan term. Car loan rates are typically fixed, meaning they stay the same for the duration of the loan. Rates usually start from around 6-7%, although the average is 10.14%, according to the latest RBA data.
Loan amount
This is the amount you borrow from a lender to finance your car, known as the ‘loan principal’. It's often equal to the car’s purchase price, but if you’re making a deposit or trading in your old vehicle, you’ll subtract those amounts to determine how much you need to borrow. The average car loan on our database is $33,490.
Upfront fees
It's important to consider any upfront fees your lender may charge on your car loan. In many cases, application fees and ongoing or monthly fees are added to your total loan amount. When this happens, you’ll pay interest on those fees as well as on the loan principal.
Loan term
This is the length of your car finance agreement. Lenders use it to calculate your weekly, fortnightly, or monthly repayments. It’s worth calculating your car loan with different loan terms to see the impact on your repayments. A shorter loan term means higher repayments, but you’ll pay less interest overall. Most borrowers who take out a car loan through Money.com.au choose a 5-year term.
Once you enter your car loan details, you'll see an estimated repayment amount. You can choose monthly, fortnightly, or weekly repayments to view the amount at different frequencies. Based on the information provided, you'll also see how much interest you'll pay over the life of the loan.
How is interest calculated on a car loan?
Your car loan repayments go toward paying down the amount you borrowed (the 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, which for a 30-day month would be $147.90
Monthly car loan repayment calculation example
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 | $40,000 |
6% interest | $773.31 |
8% interest | $811.06 |
10% interest | $849.88 |
Car loan amount | $50,000 |
6% interest | $966.64 |
8% interest | $1,013.82 |
10% interest | $1,062.35 |
| Car loan amount | 6% interest | 8% interest | 10% interest |
|---|---|---|---|
$20,000 | $386.66 | $405.53 | $424.94 |
$30,000 | $579.98 | $608.29 | $637.41 |
$40,000 | $773.31 | $811.06 | $849.88 |
$50,000 | $966.64 | $1,013.82 | $1,062.35 |
How does car loan interest work?
The car loan calculator uses what's known as an amortisation calculation. Amortisation refers to how you gradually repay your loan over time through regular repayments.
At the beginning of your loan, interest is calculated on a larger loan balance (the principal), so a bigger portion of your repayment goes toward interest.
As you continue making repayments, the principal reduces, but your repayment amount stays the same throughout the loan term.
Over time, more of each repayment goes toward paying down the principal, and less goes toward interest.
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