Flat Rate to APR Converter
Dealers often quote a flat rate, which understates the true borrowing cost. This converter shows the equivalent APR so you can compare dealer finance with bank loans and PCP deals on a level playing field.
Frequently asked questions
Why is APR always higher than the flat rate?
A flat rate charges interest on the original loan balance for the entire term, even though you are reducing the balance with each payment. APR reflects the true cost by accounting for the reducing balance. A flat rate of 3% typically equates to an APR of roughly 5.5–6%.
Is flat rate finance a bad deal?
Not necessarily. Some manufacturers offer very low flat rates (even 0%) as a subsidy to sell cars. The key is to convert to APR so you can compare fairly with other finance options like a personal loan or PCP deal.
How is flat rate interest calculated?
Flat rate interest = loan amount x flat rate x (term in years). For example, £18,000 at 3.5% flat over 4 years = £18,000 x 0.035 x 4 = £2,520 total interest. The monthly payment is (£18,000 + £2,520) / 48 = £427.50.
Do UK dealers have to show APR?
Yes. Under the Consumer Credit Act and FCA regulations, all UK finance advertisements must show the representative APR. However, in-person quotes may emphasise the flat rate. Always ask for the APR.
These calculations are estimates based on 2026/27 HMRC and DVLA rates. Speak to a lender or qualified financial adviser for a personalised quote.