About this calculator
With a flat rate, interest is charged on the full loan for the whole term: interest = loan × rate × years. With a reducing-balance rate, interest is charged only on what you still owe, so it falls every month. A flat rate is roughly equal to a reducing rate almost twice as high, which is why the APR is shown alongside.
Worked example
A 120,000 car with 20,000 down leaves 100,000 to borrow. At a 4% flat rate over 5 years you pay 20,000 interest — 2,000 a month, which is a true rate of about 7.42%. At 4% on a reducing balance, it would be 1,841.65 a month.
How to use the car loan calculator
- Enter the car price.
- Enter the down payment.
- Enter the term.
- Enter the interest / profit rate (per year).
- Read the result — it updates as you type.
Frequently asked questions
Why does a 4% flat rate cost more than a 4% bank loan?
Because flat-rate interest is charged on the original amount for the whole term, even as you repay. A 4% flat rate over 5 years is about the same as 7.4% on a reducing balance.
What should I compare between car finance offers?
Compare the APR (or annual percentage rate) and the total amount payable, including admin fees and insurance, not just the monthly payment.