Why use this calculator
Car finance is sold on the monthly repayment, which is exactly the number that can be manipulated by stretching the term or adding a balloon. Both make a car look affordable while increasing what it costs and raising the chance you will owe more than it is worth.
This calculator shows the repayment alongside total interest and the full cost including your deposit, so the comparison between a five-year and a seven-year deal is visible rather than hidden. It also handles balloon payments properly, which most simple calculators do not, and flags when a long term is likely to leave you owing more than the car is worth.
How to use it
- Use the drive-away price rather than the advertised price, since registration, stamp duty and dealer delivery add several thousand dollars.
- Enter your cash deposit and any trade-in allowance, subtracting anything still owing on the trade-in vehicle.
- The interest rate should be the quoted rate on the finance contract.
- If the deal includes a balloon or residual payment, enter it.
- The calculator treats it correctly as financed but not amortised, which is why it lowers the repayment and raises total interest.
What each result means
- Monthly repayment
- The contracted monthly amount. Comprehensive insurance, registration, fuel and servicing are on top.
- Amount financed
- Price less deposit and trade-in: the balance the lender actually charges interest on for the whole term.
- Total interest
- The cost of the finance over the term. Compare it across offers rather than comparing repayments.
- Total cost of the car
- Everything you part with, including the deposit and trade-in value. This is the honest price of the vehicle.
- Balloon due at the end
- A lump sum payable at the end of the term, usually met by refinancing or selling the car. Which only works if it is still worth that much.
- Interest as a share of the amount financed
- How much of the financed amount is interest. Above 25% suggests the term or rate deserves another look.
- Cost per week
- The repayment expressed weekly, which is easier to judge against a weekly budget.
The formula
The amount financed is price minus deposit minus trade-in.
Where there is no balloon, the repayment uses the standard amortisation formula
M = P × [r(1+r)ⁿ] ÷ [(1+r)ⁿ − 1]
With a balloon, only the amortising portion (loan minus balloon) is repaid through instalments, while the balloon accrues interest each month and is repaid as a lump sum at the end. Total interest is everything paid minus the amount financed.
How this number is used in practice
Cars depreciate faster than most loans amortise, especially in the first two years. A long term with a small deposit routinely leaves you in negative equity, owing more than the car is worth, which becomes a real problem if it is written off, since insurance pays market value and you still owe the balance. Gap insurance exists precisely because this is common.
Balloon payments are the sharpest version of the same problem. They lower the repayment by deferring a large chunk of principal, but the lump sum arrives at exactly the point the car has depreciated most. Refinancing it is possible and usually expensive; selling to cover it only works if the market value exceeds the balloon.
Dealer finance and bank finance are different products sold in different moments. Dealer finance is convenient and the commission is built into the rate; a pre-approved bank or credit union loan gives you a rate to compare against and turns you into a cash buyer, which is a materially stronger negotiating position on the price itself.
Worked examples
$35,000 car with $5,000 deposit at 7.5% over 5 years
Monthly repayment about $601, total interest roughly $6,050, total cost of the car around $41,050.
The same car over 7 years
Repayment falls to about $459 but total interest rises to roughly $8,570. And the car is worth far less at the end.
$35,000 car at 0% manufacturer finance over 4 years
Repayment of $625 with no interest. Though these offers often come with a higher purchase price.
When people use it
- Comparing dealer finance against a pre-approved bank loan
- Checking whether a repayment fits your budget before visiting a dealership
- Seeing what a longer term or a balloon actually costs
- Working out the true total cost of a vehicle including deposit
- Deciding how much deposit to put down to avoid negative equity
Tips
- Get pre-approved finance before visiting a dealer. It gives you a rate to beat and makes you effectively a cash buyer.
- Negotiate the drive-away price first and finance second. Bundling them lets a dealer give ground on one and take it back on the other.
- Avoid terms longer than five years. Depreciation outpaces repayment, leaving you owing more than the car is worth.
- Treat a balloon payment as a debt you are deferring, not a discount. It arrives when the car is worth least.
- Zero per cent finance is often paired with a higher purchase price. Compare the total cost against a discounted cash price with a normal loan.
- Budget for insurance, registration, servicing, tyres and fuel. On a typical car these add substantially to the monthly repayment.
What it assumes, and where it stops being accurate
- A fixed interest rate for the whole term with equal monthly repayments.
- The trade-in figure is net of any amount still owing on that vehicle.
- Establishment fees, monthly account fees and dealer origination fees are excluded.
- Balloon interest is charged monthly on the deferred amount and the principal is repaid in full at the end.
- Running costs, insurance, registration, fuel, servicing, tyres, are not included.
- Depreciation is discussed but not calculated; use a running cost calculator for total ownership cost.
Terms used on this page
- Drive-away price
- The total cost including registration, stamp duty and dealer delivery, as opposed to the advertised price.
- Balloon payment
- A large lump sum deferred to the end of a finance term, lowering the monthly repayment.
- Negative equity
- Owing more on a loan than the asset securing it is worth.
- Pre-approval
- A lender's conditional commitment to finance up to an amount, obtained before shopping.
Questions people ask
- How much should I put down on a car?
- Twenty per cent is a reasonable target, because it roughly offsets first-year depreciation and reduces the chance of negative equity. A larger deposit also lowers the repayment and often improves the rate offered. With little or no deposit on a long term, you are likely to owe more than the car is worth for most of the loan.
- Is a 0% car loan actually a good deal?
- Sometimes, but compare the total cost rather than the rate. Interest-free offers are frequently tied to a higher purchase price or exclude discounts available to cash buyers. Work out the total for the zero per cent deal and compare it against a discounted price financed at a normal rate. The second is often cheaper overall.
- What is a balloon payment and should I take one?
- It is a large lump sum deferred to the end of the term, which lowers the monthly repayment because you are repaying less principal along the way. It arrives when the car has depreciated most, so covering it usually means refinancing or selling. Take one only if you have a specific plan for it, not because the repayment looks better.
- Should I get finance from the dealer or my bank?
- Get a bank or credit union pre-approval first, then let the dealer try to beat it. Dealer finance is convenient and the commission is built into the rate, so it is not automatically expensive but it is rarely the cheapest. Arriving pre-approved also strengthens your position on the price itself.
- What is negative equity on a car loan?
- Owing more than the car is worth, which happens when depreciation outpaces repayment. It matters most if the car is written off, because insurance pays market value and you remain liable for the shortfall. A larger deposit and a shorter term are the two reliable ways to avoid it.
- Does this include running costs?
- No. Only the finance. Insurance, registration, fuel, servicing and tyres typically add a substantial amount each month, and on a cheaper car they can exceed the loan repayment itself. Budget for them separately before deciding what you can afford.
Use this with
Car Loan Calculator answers one part of the question. These pick up where it stops: Loan Repayment Calculator, Car Loan vs Lease Calculator, Car Running Cost Calculator and Fuel Cost Calculator.
Where these figures come from
This calculation is jurisdiction-neutral arithmetic. No country-specific rules are applied.
- ASIC Moneysmart: loans and credit. Independent Australian guidance on borrowing costs
- Reserve Bank of Australia: indicator lending rates. Published lending and deposit rates
Car Loan Calculator produces an estimate for general information. It is not financial, tax, medical, legal or engineering advice. read the full disclaimer. Spotted a wrong number? Report it and it gets fixed. The form picks up this calculator and the inputs you used.