APR Calculator
Work out the true APR on any car finance deal. Enter the amount borrowed, the monthly payment quoted, and the loan term — this calculator reverse-engineers the annual percentage rate so you can compare deals fairly.
Reviewed by Richard Ross · Last updated April 2026
How APR Calculator works
What APR actually measures
APR — Annual Percentage Rate — is the legally defined cost of borrowing in the UK. Section 55A of the Consumer Credit Act 1974 requires lenders to disclose APR in pre-contract information, and the actuarial method for calculating it is set out in the Consumer Credit (Total Charge for Credit) Regulations 2010 (SI 2010/1011). APR is not the same as the interest rate. APR expresses the total charge for credit — interest plus most mandatory fees — as a single annualised percentage of the amount borrowed, after accounting for the declining balance. The advantage is that any two finance products can be compared on a like-for-like basis using a single number, regardless of how interest is structured underneath. Lenders are legally required to quote a representative APR in any financial promotion that includes a rate.
How the calculation works
This calculator reverse-engineers the APR from three inputs: the amount borrowed, the monthly payment, and the loan term in months. It solves the standard annuity equation — the principal equals the sum of all future monthly payments discounted at the periodic interest rate — using Newton-Raphson iteration. The monthly rate that satisfies the equation is then annualised to give the APR figure. Schedule 1 of SI 2010/1011 defines the strict statutory APR as a compound annualisation: APR = (1 + r)^12 - 1, where r is the monthly rate. The figure shown here uses the simpler nominal form 12 × r, which sits a few basis points below the statutory figure at low rates, widens to around half a percentage point at 10% APR, and approaches one full percentage point at 15% APR. For prime credit comparisons in the 3-8% range, the gap is rarely decisive; on subprime quotes above 10%, sanity-check against the lender's own published representative APR.
Worked example: a £15,000 car loan over 48 months
Suppose a dealer quotes £350 per month over 48 months on a £15,000 borrow. Total repaid is £350 × 48 = £16,800, so total interest paid is £1,800. A flat-rate calculation would give £1,800 / £15,000 / 4 years = 3.0%, suggesting a deal that sounds cheap. The actuarial monthly rate that solves the annuity equation for these numbers is approximately 0.475%, which annualises to an APR of around 5.7% in this calculator (or 5.85% under the strict compound formula). The headline figure is almost double the flat rate — that gap reflects the fact that you do not have the full £15,000 outstanding for the full term: with each monthly payment the balance falls, so the effective rate on the declining balance is higher than the flat rate implies.
Representative APR vs your personal APR
When a lender advertises a representative APR (for example, 8.9% representative APR), FCA rule CONC 3.5.5R requires that at least 51% of customers granted credit as a result of the promotion must receive that rate or better. The other 49% may be offered a higher APR — sometimes substantially higher — depending on credit profile, income, deposit size, and loan-to-value. The headline rate is therefore a marketing figure, not a binding offer. Always run a quote based on the personal APR you are actually offered, not the representative rate, when comparing deals. The personal APR is the only figure that determines what you will repay.
APR vs flat rate — why dealers often quote both
A flat rate calculates interest on the original loan amount for every year of the term, ignoring that you reduce the balance with each payment. APR accounts for the declining balance. The rough relationship is APR ≈ flat rate × 2N / (N + 1), where N is the number of monthly payments — so a 4% flat rate over 48 months is approximately 7.8% APR. The relationship is only an approximation, but it explains why flat rates always look more attractive than they really are. UK regulations require lenders to quote APR alongside any flat rate in regulated credit promotions, but flat rates still appear on some older HP paperwork, dealer point-of-sale summaries, and certain leasing disclosures.
What APR includes — and what it does not
Under SI 2010/1011, the total charge for credit includes the interest charge, any mandatory administration or arrangement fees, and any insurance that is a condition of the credit. It excludes optional insurance products (GAP cover, payment protection), default fees triggered by breach, voluntary early-settlement charges, and any balloon-payment-related fees that fall outside the periodic schedule. This matters because two deals with the same APR can still differ in total cost if one bundles optional add-ons that fall outside the statutory calculation. When comparing quotes, always look at both the APR and the total amount payable side by side — the APR tells you the rate; the total amount payable tells you the cash you part with.
Further reading
A step-by-step walkthrough of the APR calculation, including a manual worked example you can verify against this calculator.
How to calculate APR on a UK car loan: a step-by-step guide →Frequently asked questions
What is APR?
APR (Annual Percentage Rate) is the annualised cost of borrowing, expressed as a percentage. It includes compound interest and most fees, making it the standard way to compare finance deals in the UK. Lenders are legally required to show the representative APR.
What is the difference between APR and flat rate?
A flat rate calculates interest on the original loan amount for the entire term, ignoring that you reduce the balance with each payment. APR accounts for this and is always higher than the equivalent flat rate. A 3% flat rate is roughly equivalent to a 5.5–6% APR.
Is a lower APR always better?
Generally yes, but check the total cost of credit too. A lower APR over a longer term can cost more in total interest than a higher APR over a shorter term. Always compare the total amount repayable as well.
What is representative APR?
The representative APR is the rate that at least 51% of successful applicants will receive. Your actual APR may be higher depending on your credit score, income, and other risk factors.
How do I calculate APR in the UK?
You need three numbers: the amount borrowed, the monthly payment, and the loan term in months. The actuarial method — required by the Consumer Credit (Total Charge for Credit) Regulations 2010 (SI 2010/1011) — solves for the monthly interest rate that makes the present value of all future payments equal to the principal, then annualises that rate. There is no closed-form algebraic solution: it has to be solved iteratively (most calculators use Newton-Raphson). As a sanity check, the APR is always higher than the equivalent flat rate quoted on the same deal.
What APR is typical for UK car finance in 2026?
Headline representative APRs on UK personal car finance in early 2026 are widely advertised in the 7-12% range for prime credit deals, rising into the mid-teens or higher for subprime HP. These rates broadly track Bank of England base rate movements and lender funding costs, so they shift quarter to quarter. Always look at the personal APR you are offered rather than the representative figure — under FCA rule CONC 3.5.5R, only 51% of borrowers responding to a promotion need to receive the headline rate or better.
Does APR include the deposit on a PCP or HP deal?
No. APR is calculated on the amount financed only, which is the on-the-road price minus your deposit and any part-exchange equity. The deposit itself does not incur interest because it is not borrowed money. This matters when comparing deals: a £25,000 car with a £5,000 deposit at 8% APR is financing £20,000, whereas the same car with a £10,000 deposit at 8% APR is financing £15,000. The APR is the same, but the total interest paid in pounds is very different — always look at total amount payable alongside APR.
Does extending the loan term lower the APR?
No. APR is independent of term: extending the loan from 36 to 60 months does not change the APR if the underlying interest rate stays the same. What does change is the monthly payment (lower) and the total interest paid in pounds (higher), because you are borrowing for longer. Lenders sometimes offer different APRs at different terms as a marketing decision, but that is a pricing choice, not a mathematical consequence. A longer term at the same APR always costs more in total interest, even though the monthly figure looks more affordable.
These calculations are estimates based on 2026/27 HMRC and DVLA rates. Speak to a lender or qualified financial adviser for a personalised quote.