Car Finance Calculator

A car finance calculator is an easy-to-use tool. It estimates the monthly amount you could expect to pay for your car finance. The calculator is a popular part of preparation before applying for car finance.

How does it work? You input the amount you want to borrow, the years to repay the loan and your credit profile. The information you’ll get back are:

• Total amount to be paid back.
• Interest charges.
• Amount of the monthly repayments.

It would help. We recommend you work out a simple affordability budget before hitting the calculator. The lender will likely want to assess your affordability, especially if you don’t have a great credit score.

Demonstrating how much you can afford could be very helpful. An affordability check is to total up your monthly income minus the expenses. Out of what’s left will need to cover the car finance repayment and running cost of the vehicle, plus anything else you may have forgotten.

Don’t assume the result you get from the calculator will be precisely the same as any offer from a car finance lender. It should be close, but the amounts won’t match exactly. Why?

The only piece of personal information you input into the calculator is your credit profile, so there are plenty of unknowns. However, the lender wants more details about your circumstances, such as age, income, job and car type. Therefore a tailored offer from the lender could be lower or higher than the calculator.

The car finance calculator is easy to use and, to be honest. You don’t have to read the instructions. It’s that straightforward.

However, for those who prefer some direction, including myself, here are the steps to working out your car finance cost on the calculator.

The calculator has three fields that require input from you.

Amount to borrow – You have two options – enter the amount in the field box or move the slider from left to right so the figure you want to borrow appears in the box above.

To pay over – drag the slider until the number of years you wish to repay the loan displays.

Credit rating – select the profile from Excellent, Good, Fair or Poor that best matches your financial status.

Adjusting the calculator allows you to explore how much the costs change for different scenarios. You might want to increase the amount to borrow, reduce, or extend how long the agreement lasts – the calculator does the sums.

The calculator aims to provide you with a guide to the key figures for your loan.

• Interest rate (APR)
• Length of the loan
• Monthly payments.
• The total cost of credit
• Total repayment

Note: The credit profiles on the car finance calculator use APRs that are representative examples. You’ll only get an exact APR when you make an application for a quote. Doing so will not affect your credit score.

Your credit rating

 

Affordability- How much can I afford to borrow?

Is there a formula for the amount you can afford on a car? No, but logic tells us to work out a budget. The ideal way to reduce the cost of borrowing is to have a vehicle to trade in or a cash deposit. The lender might require you to pay something upfront on the deal anyway.

How long should you pay the loan over?

The longer the finance period, the lower the monthly payments, but the more significant the interest charges you incur. When using the car finance calculator, adjusting the loan period will allow you to reduce or increase the monthly payments.

Knowing your credit rating is crucial when calculating a car finance loan.

Your credit rating dictates a car finance deal’s interest rate and monthly repayments. The better your credit, the lower the interest rate you’ll pay.

If you don’t know your rating, we suggest you check in with one of the three credit reference agencies, Experian, Equafax or TransUnion, rather than guess.

What is the right car for you and your circumstances?

Two types of car finance dominate the UK market Hire Purchase (HP) and Personal Contract Purchase (PCP). They both allow you to make regular monthly payments over a few years while vehicle ownership stays with the lender throughout the contract. However, when the agreement ends with an HP, you own the car outright, but on a PCP, you need to pay an additional charge, known as the balloon, to keep the vehicle.

Suppose you can afford the repayments on a car under four years old PCP car finance is the popular option. You certainly can get  PCPs on older used cars as well, but the possibilities get fewer with the age of the vehicle. However, the monthly repayments are lower than an HP loan. Still, a negative is you don’t own the vehicle automatically when the contract ends. Maybe you are happy to return the car instead of paying a large balloon amount to become the vehicle owner. Are there any restrictions? Yes,! PCP car deals come with a mileage limit. Exceed it, and you incur additional charges. What are the end-of-contract options? Pay the balloon and own the car. Give the car back and walk away. Use any positive equity in the vehicle towards a new finance deal.

The HP car finance option has higher repayments than PCP, but a big plus is you own the vehicle at the end of the contract period. HP is available on new cars, but this type of car finance is very much for buying used vehicles of all ages. Another Pro – usually, no charges are imposed for mileage driving as many miles as you like. For drivers with a bad credit rating, HP is more likely the deal you’ll get.

The longer the finance period, the lower the monthly payments, but the more significant the interest charges you incur. When using the car finance calculator, adjusting the loan period will allow you to reduce or increase the monthly payments.

How important is inputting the correct credit rating in the car finance calculator?

Knowing your credit rating is essential when using the car finance calculator to record a worthwhile estimate.

When you click the credit rating profile, you can choose Excellent, Good, Fair or Poor. The total cost of credit will vary significantly depending on your input. For instance, interest charges are much higher for a bad credit score than for Fair credit.

The car finance calculator is great for helping you check your affordability, especially if you have bad/poor credit. Remember that this is a guide; amounts will likely differ from any offer you receive. The figures will vary slightly because the calculator can only consider one variant: your credit rating. The lender looks at several additional factors, including your affordability – your disposable income after expenses.

Suppose you have a poor credit profile. The lender will set a lower limit you can borrow because they see someone with bad credit as a greater risk. It’s unlikely your poor credit will affect the contract term you choose – the better the credit rating, the lower the monthly repayments.

Using the car loan calculator, you can try out different options to help see what you can borrow for your new car. Remember to stick to the amount you can afford because the lender will likely check your affordability with you.