Financing a car in the UK is a common way to acquire a vehicle without paying the full price upfront. Car finance typically involves borrowing a sum of money to purchase a car and repaying it over a set period with interest. This calculator helps you estimate your monthly payments based on key financial details.
How the Calculator Works
The UK car finance calculator uses a standard loan amortization formula to determine the monthly payment. The formula takes into account the total amount to be financed, the annual interest rate, and the loan term in months.
The steps involved are:
Determine the Loan Amount: This is the car's price minus any deposit you pay.
Convert Annual Interest Rate to Monthly: The annual rate is divided by 12 to get the monthly rate. This is then converted to a decimal by dividing by 100.
Calculate Monthly Payment: The formula used is:
M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1]
Where:
M = Your total monthly loan payment
P = The principal loan amount (car price – deposit)
i = Your monthly interest rate (annual rate / 12 / 100)
n = Total number of payments (loan term in months)
Key Factors to Consider:
Car Price: The total cost of the vehicle you wish to purchase.
Deposit: The upfront payment you make. A larger deposit reduces the amount you need to borrow, potentially lowering your monthly payments and the total interest paid.
Loan Term: The duration over which you will repay the loan, usually expressed in months. Longer terms mean lower monthly payments but more interest paid overall. Shorter terms mean higher monthly payments but less interest paid.
Annual Interest Rate (APR): This is the cost of borrowing money, expressed as a percentage of the loan amount per year. A lower APR means you pay less interest. Always compare APRs when shopping for finance.
Types of Car Finance in the UK:
Hire Purchase (HP): You pay a deposit, then monthly instalments. At the end of the term, you pay a small "option to purchase" fee to own the car.
Personal Contract Purchase (PCP): Similar to HP, but with a guaranteed future value (GFV) for the car. Your monthly payments are based on the difference between the car's price and its GFV. At the end, you can return the car, part-exchange it, or pay the GFV to own it.
Personal Loan: You borrow money from a bank or lender and use it to buy the car outright. You then repay the loan with interest.
This calculator provides an estimate for a standard loan repayment. Always read the full terms and conditions of any finance agreement before signing.
function calculateCarFinance() {
var carPrice = parseFloat(document.getElementById("carPrice").value);
var deposit = parseFloat(document.getElementById("deposit").value);
var loanTerm = parseInt(document.getElementById("loanTerm").value);
var annualInterestRate = parseFloat(document.getElementById("annualInterestRate").value);
var monthlyPayment = 0;
if (isNaN(carPrice) || carPrice <= 0) {
alert("Please enter a valid car price.");
return;
}
if (isNaN(deposit) || deposit < 0) {
alert("Please enter a valid deposit amount.");
return;
}
if (isNaN(loanTerm) || loanTerm <= 0) {
alert("Please enter a valid loan term in months.");
return;
}
if (isNaN(annualInterestRate) || annualInterestRate < 0) {
alert("Please enter a valid annual interest rate.");
return;
}
var principal = carPrice – deposit;
if (principal 0) {
var numerator = principal * monthlyInterestRate * Math.pow(1 + monthlyInterestRate, loanTerm);
var denominator = Math.pow(1 + monthlyInterestRate, loanTerm) – 1;
monthlyPayment = numerator / denominator;
} else {
// If interest rate is 0, payment is simply principal divided by term
monthlyPayment = principal / loanTerm;
}
document.getElementById("monthlyPayment").innerText = "£" + monthlyPayment.toFixed(2);
}