Credibrate

Car Loan Calculator

Work out your monthly car loan repayments. Enter the vehicle price, your deposit, the APR offered by your lender, and the loan term to see the total cost of borrowing.

Reviewed by Richard Ross · Last updated April 2026

How Car Loan Calculator works

How car loan payments are calculated

Monthly payment = L × r / [1 − (1 + r)^(−n)], where L is the loan amount (price minus deposit), r is the monthly interest rate (APR ÷ 12 ÷ 100), and n is the number of monthly payments. Total interest = (monthly payment × n) − L. This is the standard annuity formula used by all UK lenders.

APR vs flat rate — why it matters

Flat rates are quoted on the original loan balance, while APR represents the true annual cost including compound interest. A 3.9% flat rate is equivalent to approximately 7.1% APR on a 48-month loan. Always compare APR, not the flat rate. The FCA requires all lenders to quote APR prominently.

Total cost of borrowing

The total amount repayable = (monthly payment × term) + deposit. Dividing total interest by the loan amount gives the cost of credit as a percentage. On longer terms, monthly payments are lower but total interest paid is higher. A 60-month loan at the same APR as a 48-month loan costs more in total interest even though the monthly payment is lower.

Worked example: £25,000 car, £5,000 deposit, 6.9% APR, 48 months

Loan amount: £25,000 − £5,000 = £20,000. Monthly rate: 6.9% ÷ 12 = 0.575%. Monthly payment: £20,000 × 0.00575 ÷ [1 − (1.00575)^(−48)] ≈ £476.64. Total of monthly payments: £476.64 × 48 = £22,879. Total interest: £22,879 − £20,000 = £2,879. Total paid (including deposit): £22,879 + £5,000 = £27,879. Compare with a 60-month term at the same APR: Monthly payment ≈ £395. Total interest ≈ £3,700 — £821 more than the 48-month option.

Source: FCA — Consumer credit explained (fca.org.uk). Consumer Credit Act 1974. FCA — Mortgage and credit transparency rules (fca.org.uk/consumers/car-finance).

Frequently asked questions

What is a car loan?

A car loan (also called a personal loan for a car) is an unsecured or secured loan used to buy a vehicle. You repay the full amount plus interest in equal monthly instalments over a fixed term. Unlike PCP or HP, you own the car outright from day one (if unsecured) or once the loan is repaid (if secured).

What APR should I expect on a car loan in the UK?

Typical UK car loan APRs range from around 3% for borrowers with excellent credit to 15%+ for those with lower credit scores. Dealer finance often quotes flat rates which look lower than the true APR, so always compare the APR, not the flat rate.

Is a car loan the same as HP?

Not exactly. A personal car loan gives you immediate ownership, while Hire Purchase (HP) means the finance company owns the car until the final payment. Both involve fixed monthly payments over a set term with no balloon payment at the end.

Can I pay off a car loan early?

Yes. Under the Consumer Credit Act, you can settle a car loan early and receive a rebate on future interest. Your lender may charge up to 58 days of additional interest as an early settlement fee. Use our early settlement calculator for an estimate.

What is a representative APR?

A representative APR is the rate at which the lender must offer finance to at least 51% of successful applicants. Your personal rate may be higher if your credit score is lower. Always apply to check your actual rate — most lenders offer a soft search that does not affect your credit file.

Is dealer finance or a personal loan better for buying a car?

It depends on the rates available to you. Dealer PCP or HP can have competitive rates but you do not own the car during the agreement. A personal loan gives you immediate ownership and may offer a lower APR if you have a strong credit score. Compare the APR and total cost of each option before committing.

Does a car loan affect my credit score?

Applying for a car loan triggers a hard credit search, which shows on your credit file for 12 months. Successfully repaying a car loan improves your credit history over time. Missing payments damages it. Check whether a lender offers a soft search pre-approval (which does not affect your score) before making a formal application.

What is Section 75 protection on a car loan?

Section 75 of the Consumer Credit Act protects purchases made on credit between £100 and £30,000. If you buy a car using a personal loan from a bank, Section 75 does not apply — it only covers purchases made directly on a credit card. However, if the vehicle is faulty or the seller misrepresents it, you have rights under the Consumer Rights Act 2015 regardless of how you paid.

Should I put a larger deposit down on a car loan?

A larger deposit reduces the loan amount, cuts total interest paid, and lowers your monthly payment. It may also improve the APR offered if it reduces the lender's risk. However, tying up a large lump sum in a depreciating asset has an opportunity cost — compare the after-tax return on savings versus the interest saved on the loan.

What is the cheapest way to finance a car in the UK?

0% finance deals from manufacturers are the cheapest if you qualify — you pay no interest. Otherwise, a personal loan at the lowest available APR is usually cheaper than PCP or HP because you own the car immediately and there is no balloon payment. Compare total cost, not just monthly payment, across all options.

These calculations are estimates based on 2026/27 HMRC and DVLA rates. Speak to a lender or qualified financial adviser for a personalised quote.