How much will my car loan repayments be?

Three numbers decide your repayment: the amount you borrow, the interest rate and the term. Everything else, such as how often you pay and any fees, moves it by smaller amounts. If you know those three, you can get a reliable estimate in a few seconds. The car loan calculator on the home page does it live as you type.

All the rates on this page are examples, not offers. Your own rate depends on your situation and the lender, so treat the figures as a guide.

A grid of common loans

This grid shows the monthly payment, and the total interest over the loan, at an example rate of 12.95% a year. Each amount is what you borrow, after any deposit.

The interest for the same loans is in this second grid.

Read across a row and you see the trade-off. The payment falls as the term gets longer, but the interest climbs. Read down a column and you see that the payment scales with the amount borrowed.

A shortcut you can do in your head

At 12.95%, every $1,000 you borrow costs about:

• $33.67 a month over three years
• $22.73 a month over five years
• $18.16 a month over seven years

So to estimate a $17,000 loan over five years, work out 17 x $22.73. That is about $386 a month. The exact answer from the calculator is $386.37. The shortcut only works for one rate and one term at a time, so if your rate is different, use the calculator.

Start from the car price, not the loan

Most people start with the price of the car, so work from there.

1. Take the car price.
2. Subtract any deposit or trade-in. This is the cash you put in.
3. Add any fees the lender puts onto the loan.
4. The result is the amount borrowed. Use that in the grid or the calculator.

For example, a $25,000 car with a $5,000 deposit means you borrow $20,000. At 12.95% over five years that is $454.55 a month, against $568.19 a month with no deposit. The $5,000 deposit saves $113.64 a month and $1,818.25 in interest.

If a lender adds a $400 set-up fee to that loan, you borrow $20,400 and the payment becomes about $463.64 a month. Fees are easy to overlook because they are small next to the car price, but they raise the payment and you pay interest on them.

Weekly and fortnightly versions

The same $20,000 loan at 12.95% over five years comes to:

• Monthly: $454.55
• Fortnightly: $209.36 (130 payments)
• Weekly: $104.59 (260 payments)

Weekly looks smaller because there are more payments. It is the same loan, with slightly less interest because the balance comes down sooner. See the weekly calculator for weekly figures at other amounts.

What changes the number you are quoted

Several things sit behind the rate a lender offers, and they differ between lenders. Lenders usually look at your income and spending, your credit history, how much you want to borrow, the age and type of the car, and the length of the loan. Nobody can tell you in advance which rate you will be offered.

Because of that, the most useful thing you can do is get your quote in writing, with the total cost and the fees, and compare it with a second quote. The Credit Contracts and Consumer Finance Act requires lenders to give you a disclosure statement with the repayments, interest rate, fees and the amount you will pay. Consumer Protection NZ sets out what it must include.

A full example, start to finish

Here is one car worked through from sticker price to payment. All figures use an example rate of 12.95%.

• Car price: $22,000
• Trade-in and cash deposit: $4,000
• Set-up fee added to the loan: $350
• Amount borrowed: $22,000 less $4,000 plus $350, which is $18,350

Over four years, paid monthly, the repayment is $491.83 and the total repaid is $23,607.81, so interest is $5,257.81. Over five years it is $417.05 a month, with $6,672.96 in interest. The extra year saves $74.78 a month and costs $1,415.15 more.

Paid weekly over four years, the payment is $113.14 and the interest is $5,183.48.

Now vary the rate while keeping four years monthly. At 10.95% the payment is $473.82, and at 14.95% it is $510.23. So a four-point swing in the rate moves the monthly payment by about $36 on this loan. Most people have more room to change the amount they borrow than the rate they are offered, which is why the deposit and the car price are the first places to look.

You can run your own version by typing the same lines into the calculator: price, deposit, fees, term, rate and how often you pay.

Repayment is not the whole running cost

Before settling on a number, add up what the car will cost to keep on the road.

• Insurance, which lenders often expect on a financed car
• Registration and warrant of fitness
• Fuel and servicing
• Tyres and repairs, especially on an older car

These come from the same income as the repayment. A car with a lower repayment and high running costs can cost more week to week than a dearer car that is cheap to run.

Checking it fits your budget

Take the repayment from the calculator and compare it with what is left after your essentials: rent or mortgage, food, power, phone and your other debts. If the number is tight, there are four fixes, in order of effect: a cheaper car, a bigger deposit, a lower rate, or a longer term. The last one lowers the payment but raises the total, so use it carefully. The page on car finance with low repayments covers the trade-offs.

If you are already struggling with payments on an existing loan, see what to do when you can’t afford car repayments.

Getting a real figure

A calculator can only estimate. For a real figure you need a lender’s offer. Our check is a referral service, not a lender or a dealer: one application and one soft credit check go to a panel of NZ lenders, and the lenders decide case by case. Nobody can promise approval. See the disclosure page for how it works.

Sources

• Consumer Protection NZ: loan for your car for disclosure statements and fees
• Sorted for budgeting and borrowing basics