What this calculator works out
This calculator takes a vehicle price, your deposit, an APR, a term and any fees, and returns the monthly payment, the total you will have paid by the end, and how much more that is than the cash price.
That last figure is the one worth looking at. Car finance is usually presented as a monthly payment, which makes two very different deals look similar. The cost above the cash price shows what the finance itself is costing you.
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Before you compare deals
- Use the price you would actually negotiate, not the list price. Dealers sometimes offer a lower cash price than finance price, or a contribution that only applies to finance.
- Include every fee: arrangement fees, documentation fees and the option-to-purchase fee that hire purchase agreements usually charge at the end.
- Check whether the APR is fixed. Most car finance is, but confirm rather than assume.
- Remember this covers the finance only. Insurance, tax, servicing, tyres and depreciation are separate and often larger.
A deposit reduces the amount borrowed, so it reduces both the monthly payment and the interest charged on every remaining month. Putting down an extra £1,000 saves more than £1,000 across the agreement, because that £1,000 would otherwise have accrued interest for the whole term.
How this calculator works
The calculator borrows the price less your deposit, then amortises it:
Amount financed = price − deposit
r = APR ÷ 12 ÷ 100, n = years × 12
Monthly payment = amount financed × r ÷ (1 − (1 + r)−n)
Total paid = (monthly × n) + deposit + fees
Finance cost = total paid − cash priceThis models a conventional hire purchase or personal loan structure where the balance reduces to zero over the term. Personal contract purchase works differently, because a large final payment is deferred to the end — use the PCP vs HP Calculator for that comparison.
Worked example: a £20,000 car over four years
Using the default figures — £20,000 price, £3,000 deposit, 8.9% APR over four years, with £250 of fees:
- Amount financed: £20,000 − £3,000 = £17,000
- Monthly payment: £422.24 over 48 months
- Total paid: (£422.24 × 48) + £3,000 + £250 = £23,517.47
- Finance cost above the cash price: £3,517.47
The finance adds roughly 17.6% to the cost of the car. Put differently, £3,517 buys nothing except the ability to pay later. That may be a perfectly reasonable trade, but it should be a decision made with the figure in front of you rather than a monthly payment that happens to fit the budget.
Common mistakes
- Negotiating the monthly payment rather than the price. A dealer can reach almost any monthly figure by extending the term.
- Ignoring fees at the end of the agreement. Hire purchase usually carries an option-to-purchase fee that is easy to overlook.
- Financing over longer than you will keep the car. This is how people end up owing more than the vehicle is worth.
- Forgetting running costs. Insurance, tax, fuel and servicing frequently exceed the finance payment over the life of ownership.
- Assuming a manufacturer's 0% offer is free. It sometimes replaces a cash discount you would otherwise have received.
Frequently asked questions
Is it cheaper to pay cash?
In pure cost terms, almost always — cash avoids the interest entirely. The counter-arguments are that spending your savings may leave you without a buffer, and that some manufacturer finance offers come with deposit contributions large enough to outweigh the interest. Work out the total cost both ways using this calculator before deciding, and do not empty an emergency fund into a car.
What is the difference between hire purchase and a personal loan?
With hire purchase, the finance company owns the car until the final payment, and it is secured against the vehicle. With a personal loan you own the car outright from the start and the debt is unsecured. Hire purchase is often easier to obtain and sometimes cheaper; a personal loan gives you more freedom to sell the car whenever you choose.
Can I settle car finance early?
Usually yes. Ask the lender for a settlement figure rather than assuming it is the sum of the remaining payments — early settlement reduces the interest, though the lender may add limited compensation. Under hire purchase you may also have the right to voluntary termination once you have paid half the total amount payable, which is worth understanding before you need it.
Does a bigger deposit always help?
It reduces both the monthly payment and the total interest, so financially yes. The exception is if putting the money down leaves you with no emergency fund, in which case an unexpected cost may send you to more expensive credit. Balance the two rather than maximising the deposit.
Are the figures here what a dealer will quote?
Close, but treat them as an estimate. Dealers structure agreements in different ways, may apply fees at different points and sometimes quote weekly rather than monthly. Use this to sanity-check a quote and to compare offers on a consistent basis, then read the agreement itself.
Related tools
References
- MoneyHelper — guidance on car finance types, deposits and early settlement
- Financial Conduct Authority — regulation of motor finance, commission disclosure and affordability
- GOV.UK — vehicle tax, registration and the legal position on financed vehicles
Sources are checked at publication and can change — how I choose and check references.