What will this car actually cost you?
The instalment is the number the dealer shows you. The total interest and the balloon are the numbers that decide whether the deal is any good, and they are the ones nobody puts on the windscreen.
The full price, including any extras rolled into the deal.
What you are putting in up front. Leave it blank if nothing.
The annual rate the bank quoted you. Ask for it as a percentage, linked or fixed.
Put in the price and the rate the bank quoted you. The instalment is the easy part. What comes after it is the part worth seeing.
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Arithmetic on the figures you enter, not a quote and not a credit decision. Real agreements add initiation and monthly service fees, and a linked rate moves with the repo rate, so your bank’s number will differ. Ask for the total cost of credit in writing before you sign, which they are required to give you. Our other tools.
Three things that change the total more than the rate
People negotiate hard on the interest rate and then accept terms that cost far more than the rate ever will.
The balloon
Lowers the instalment, raises the interest, and leaves a lump sum due on a car that has been depreciating for five years. If you cannot pay it, you refinance it or trade the car in on worse terms than you expected.
The term
Every extra year lowers the instalment and adds interest. It also extends the period where you owe more than the car is worth, which is the gap that hurts if it is written off.
What got rolled in
Service plans, extras, and sometimes the shortfall from a previous car. All of it is financed at the same rate for the same years, and it is why the amount financed is often well above the price on the window.
Once the finance is signed, the next question is what happens if the car is written off while you still owe on it. That gap has its own calculator.
Questions people ask
- What is a balloon payment on car finance?
- A lump sum you still owe at the end of the term, usually a percentage of what you financed. It lowers your monthly instalment, which is how it is sold. It also increases the total interest, because you pay interest on money you never pay down, and it leaves you owing a large amount on a car that has spent years losing value.
- Should I take a balloon payment?
- Only if you have a concrete plan for it: cash set aside, or a genuine intention to trade the car in and start again. Taking one to afford a car you otherwise could not is the version that goes wrong, because in five years you need the lump sum and the car is worth less than you hoped.
- What is a realistic car finance term?
- Shorter is cheaper. A 72 month term lowers the instalment and costs considerably more in interest, and for much of it you owe more than the car is worth. If the only way to afford the car is the longest term plus a balloon, that is the deal telling you something.
- Why is the instalment my bank quoted different to this?
- Real agreements add an initiation fee and a monthly service fee, and a linked interest rate moves with the repo rate. This works out capital and interest only. Ask the bank for the total cost of credit in writing, which they are required to give you, and compare that against this.