What will my car actually cost me?

Estimate weekly and monthly repayments on a new or used car loan in Australia. Adjust the rate, term and balloon to see the impact.

How is interest calculated on a car loan?

Almost every Australian car loan uses reducing-balance interest, calculated monthly. Each month the lender takes your outstanding balance, multiplies it by the annual rate divided by twelve, and that is the interest for the month. Your repayment covers that interest first, and whatever is left reduces the balance.

Worked example: borrow $40,000 at 8.99% over five years. The monthly rate is 8.99% ÷ 12 = 0.749%. In the first month the interest is $40,000 × 0.749% = about $300. The repayment is roughly $830, so about $530 comes off the balance. Next month the interest is charged on the smaller balance, so slightly more of the repayment goes to principal — and it keeps shifting that way until the loan is paid out.

This is why paying extra early saves far more than paying extra late, and why a longer term costs much more in total even at the same rate. Stretching that same $40,000 from five years to seven cuts the repayment but adds thousands in interest.

How to calculate car loan repayments yourself

The standard amortisation formula is: repayment = P × r ÷ (1 − (1 + r)^−n), where P is the amount financed, r is the annual rate divided by twelve, and n is the number of months. The calculator above runs exactly this.

If there is a balloon or residual, only the portion of the loan that is actually being repaid amortises; the balloon sits at the end and attracts interest the whole way through. That is why a balloon lowers the monthly figure but raises the total interest paid.

Weekly figures are almost always the monthly repayment divided by 4.333, not a separate calculation. If a lender quotes a weekly number that is exactly a quarter of the monthly one, they are quoting four-weekly and the annual total is higher than it looks.

What is a comparison rate, and why is it higher?

The advertised rate is interest only. The comparison rate folds in the fees a lender charges to set up and run the loan — establishment fees, monthly account fees — and expresses the whole cost as a single annual percentage, calculated on a standard example loan.

That standard example is the catch. In Australia the benchmark for car loans is typically a $30,000 loan over five years. If your loan is larger or shorter, the published comparison rate is indicative only — fixed dollar fees weigh less on a bigger loan and more on a smaller one.

Comparison rates also exclude things that can cost real money: early repayment or exit fees, insurance products bundled at the point of sale, and dealer origination margin. Always ask for the total amount payable over the full term. That single figure is harder to disguise than a rate.

How much can I borrow for a car?

Lenders assess your income against your existing commitments, then apply a buffer. In practice, most will approve a car loan repayment that keeps your total debt servicing — mortgage or rent, credit card limits, other loans, and the new repayment — within a comfortable share of your after-tax income.

Credit card limits count at their limit, not your balance. Closing an unused $10,000 card can improve your borrowing capacity more than a deposit of the same size.

The car itself matters too. Lenders cap the loan-to-value ratio and set maximum vehicle ages, so an older used car may need a deposit even when your income comfortably supports the repayment. Use the slider above to work backwards: pick a repayment you can genuinely live with and see what car price it supports.

Should I take a balloon payment?

A balloon or residual defers part of the loan to a lump sum due at the end. It lowers the monthly repayment, which is useful for cashflow, and it suits people who trade cars every few years anyway.

The risk is negative equity. If the car's market value at the end of the term is below the balloon, you cover the gap in cash before you can move on. Set the balloon against a realistic view of what the car will be worth, not the best case.

Interest accrues on the balloon for the whole term, so the total cost of the loan is always higher with one than without.