Car Loan Repayment Calculator

How we calculate this

The formula

M

the repayment due each month

P

the amount borrowed (the principal)

B

the balloon, the lump sum due with the last repayment (0 when there is none)

r

the monthly interest rate, which is the annual rate divided by 12

n

the number of monthly repayments, which is the term in years times 12

We then apply:

• Fortnightly = M × 12 ÷ 26
• Weekly = M × 12 ÷ 52
• Total repaid = M × n + B
• Total interest = Total repaid − P
• Extra interest = Total interest − Total interest with no balloon

What we assume

• Principal and interest, paid monthly, down to the balloon. Every repayment covers the interest charged for the month and pays down part of the balance, so by the last scheduled repayment the balance has fallen to the balloon, which is paid as one lump sum with it. With no balloon the loan reaches zero on the last repayment, and the formula is the one our home and personal loan calculators use. Interest-only periods are not modelled.
• The balloon is a share of the loan, up to 50%. You enter it as a percentage of the amount borrowed. Lenders typically cap a car loan balloon at around 30% to 50%, depending on the term and the age of the vehicle, so the calculator stops at 50%. A lender may allow less, or no balloon at all, on a given loan.
• A balloon costs interest. The balloon stays owing for the whole term, so interest is charged on it every month. That is why a balloon lowers the regular repayment but raises the total interest. The extra interest figure is the difference from the same loan with no balloon.
• The rate never changes. The rate you enter is applied for the whole term. A variable rate will move, so a loan on one may not run at a single rate for its full life.
• Fees are excluded. Establishment or application fees, monthly account fees and early repayment or payout fees are not included. Compare the comparison rate on a product row to see the effect of fees.
• No extra repayments. Paying more than the scheduled amount cuts the interest charged and can shorten the term. It is not modelled here.
• Weekly and fortnightly are conversions, not schedules. They are the monthly repayment spread across the year (monthly times 12, divided by 52 or 26). Paying weekly or fortnightly on a real loan reduces interest slightly, because the balance falls sooner. Treating them as a straight conversion keeps every figure tied to the one monthly number shown on our product rows.
• Totals are measured on the monthly schedule. Total repaid is the monthly repayment times the number of months, plus the balloon, and total interest is that total less the amount borrowed.

A worked example

A car loan of $40,000 at 8.00% p.a. over 5 years, with a 30% balloon of $12,000.

1. Turn the annual rate into a monthly rate8.00% ÷ 12r = 0.006667
2. Turn the term into a number of repayments5 years × 12n = 60 months
3. Work out the growth factor(1 + 0.006667) multiplied by itself 60 times(1 + r)ⁿ = 1.4898one plus r, to the power n, equals 1.4898
4. Work out what the balloon is worth today$12,000 ÷ 1.4898$8,054.53
5. Put those into the formula($40,000 − $8,054.53) × 0.006667 ÷ (1 − 1 ÷ 1.4898)M = $647.74 a month
6. Spread the monthly figure across the year$647.74 × 12 ÷ 26, and × 12 ÷ 52$299 a fortnight, $149 a week
7. Add up what is paid over the term, balloon included$647.74 × 60 months + $12,000$50,864 repaid in total
8. Take out the amount borrowed to leave the interest$50,864 − $40,000$10,864 of interest
9. Compare the same loan with no balloonWith B = 0: $811.06 a month, $8,663 of interest$2,201 more interest with the balloon

Figures above are rounded for reading, so a line can differ by a dollar from the exact arithmetic. The calculator itself works to full precision.

Borrowing $40,000 at 8.00% p.a. over 5 years with a $12,000 balloon costs $648 a month, then $12,000 at the end, and $10,864 in interest across the full term. That is $2,201 more interest than the same loan with no balloon, which costs $811 a month.