How to Use a Car Loan Calculator & Other Tools to Your Benefit

Written by:

Georgia Matthews


June 4, 2020

Last updated

August 8, 2022

Reading time

5 minutes

Georgia Matthews

Georgia Matthews is a contributing Writer at Oiyo. She is currently studying a dual Bachelor of Laws / Bachelor of Arts (majoring in history and psychology) from the University of Queensland. Georgia has worked in a few law firms during her studies and is currently working in a corporate law firm. She is most passionate about writing, history, and travelling.

What is a car loan calculator?

A car loan calculator is a tool that allows you to estimate the total cost of your car loan. You will be able to enter the amount you would like to borrow, the interest rate and the loan term. The calculator will crunch the numbers for you so that you can assess and compare your options.

Though car loan calculators are only intended as a guide, they can assist you in making an informed decision. In this guide, we’ll run you through how car loan calculators work and other factors to consider when calculating your repayments.

How does it work?

A car loan calculator works by calculating the total amount your car loan will cost you, based on four factors. These are:

  1. How much you intend to borrow
  2. Interest rate
  3. Loan term
  4. Frequency of repayment

You can play around with the numbers that you enter into the calculator to see how this will affect your repayments. Inputting different amounts borrowed, interest rates and loan terms will change the calculation that is generated. This way, you can discover what you can reasonably afford. We’ve drawn up a quick table to demonstrate some simple calculations based on a $10,000 loan (rounded to the nearest full number). Below that, we will go through and explain each component in detail. 

Loan amountInterest rateLoan termMonthly repaymentOverall cost 
$10,00012%5 years$222$13,347
$10,00012%7 years$177$14,828
$10,00010%5 years$212$12,748

Amount borrowed

The amount you will need to borrow will differ significantly depending on what type of car you are looking to purchase. Consider the make, model and age of the car. For example, second hand cars are generally cheaper than buying a brand new car straight from the dealership. In this case, you won’t need to borrow as much money as compared to purchasing a more expensive, brand new car. 

The price of the vehicle is a critical element of the initial calculation. You will need to have a think about what you can reasonably afford to buy (though the calculator will assist in this). 

Lastly, it is always wise to consult directly with  your lender. Though a car loan calculator is a great guide, your lender can assist in arriving at a reasonable borrowing amount. If you have a preferred lender, consider what their lending capacity is as some may have limits. 


As with all loans, car loans will accrue interest. Put simply, interest is a small percentage of the loan amount that is payable on top of your loan amount. It is comparable to a small fee charged by the lender for their service of providing money to you upfront. Many lenders offer competitive interest rates, so do your research to see what the best option is for you. 

A car loan calculator will often calculate amounts using a base interest rate. Distinguish this from a comparison interest rate, which is designed to let you easily compare the true cost of the loan. The comparison interest rate combines the base interest rate with other costs and fees involved, such as account keeping fees or car insurance fees. It is still depicted as a percentage of the loan.

Fixed vs Variable interest

A fixed rate denotes that you have agreed on a certain interest rate and this will not change during the life of the loan. A variable interest rate is subject to change based on the current loan market. This means you may be paying higher interest rates for some repayments, and lower for others. What will work best for you is entirely dependent on your individual financial situation. Speak to your lender and ask what they would recommend when applying for a car loan. 

Calculating interest manually

If you would like to calculate interest yourself, you can use the following formula:

Interest payment = outstanding balance x (interest rate / number of payments a year)

Say, you’re borrowing $10,000 with a 12% base interest rate making monthly repayments. The equation would then look like this:

Interest payment = $10,000 x (0.12 / 12)

= $10,000 x 0.01

= $100

Therefore, the interest payment for your very first monthly repayment in this case would be $100. As you continue to pay off the loan, your interest payments will reduce as your outstanding balance reduces. To calculate the outstanding balance for further repayments, use the below formula and substitute it in for the outstanding balance figure.

Outstanding balance = principal – (repayment – interest cost of preceding repayment

Loan term

The amount you will have to repay in total will depend not only on the interest rate, but the loan term. A loan term is how long you will have to repay the loan. Generally, the shorter the loan term, the higher your monthly repayments will be. However, this may reduce the amount you are paying overall as you will accrue less interest. Conversely, a longer loan will mean you pay less per instalment but more in interest over the life of the loan. The term of your loan should be dictated by your ability to repay it. 

Frequency of repayments

Loan repayments are generally made in regular instalments, either monthly, fortnightly or weekly. Examine your ingoing and outgoing expenses to determine how often you can afford to make repayments. For many people, it’s easiest to align payments with when they get paid. This ensures that there’s always cash in the bank ready to go.

5 Other factors to consider when calculating your car loan

1. Security

There are two main types of car loans that you can take out, these being secured and unsecured loans. A secured loan requires you to put up an asset (generally your car in the case of car loans) as security against the loan. Though you’ll benefit from lower interest rates and fees with a secured loan, the drawback is that the lender will be able to repossess your car if you default on repayments. Secured loans are a good option if you need to borrow larger sums of money and you are reliable at making repayments.

Alternatively, unsecured car loans do not require security. As the lender doesn’t have recourse to repossess your car in cases where you fail to make your repayments, you will receive higher interest rates and fees. Your lender will also ensure that you have secure employment and are not a financial risk to increase their chances of receiving all the money back. 

2. Your personal financial situation

A car loan calculator will not take into account your personal financial situation. Consider factors such as your savings, income and lifestyle, as your borrowing capacity is affected by these. When you apply for a car loan, lenders will assess these factors to determine whether you can afford the amount of money you want to borrow. So, your lifestyle can ultimately impact your chances of getting approved. 

3. Credit score

Your credit score will heavily affect how much lenders are likely to lend to you. Your credit score is a number that represents your financial habits. Factors such as your spending habits, current debts, and how repayment reliability will affect your credit score. Lenders will look to this to decide whether you are a suitable (and reliable) borrower. If you’re unsure what your credit score is, you can check using these websites approved by the Australian Government. Some lenders will offer bad credit car loans but this could impact the interest rate you are offered. 

4. Potential fees and charges

As we mentioned above when discussing interest rates, some lenders will provide a comparison rate that includes many fees and costs associated with the loan. However, if only a base interest rate is provided, or there are additional, one-off fees that are triggered by certain events, you won’t be able to include these in your calculation. 

Therefore, it’s wise to be aware of some of the typical fees that lenders may charge you on a one-off basis. These include, but are not limited to, some of the following: 

Establishment / application feeMany lenders will charge you a fee to establish your account with them or kickstart your application. This is a very typical one-off cost to cover the processing of your loan documents.
Exit / discharge feeIf you choose to exit the loan for whatever reason (e.g. refinancing), then many lenders will charge an exit fee. This covers the cost of settling the balance and closing your account with that lender. 
Early repayment feeThese fees are similar to exit fees. Some lenders may charge you a fee to pay off your loan earlier than originally planned. 
Redraw feeOnce you’ve paid off a portion of your loan, some lenders may allow you to reborrow, or ‘redraw’ that money. This feature is helpful in cases where unexpected car costs arise. However, there is usually a small fee associated with the ability to redraw.
Late payment feeAs would be expected, a late payment fee is a penalty when you fail to make your repayment on time. 

These fees and charges must be listed in a car loan product disclosure statement. However, always double check with your lender to ensure you have the correct information. This is the simplest way to avoid any nasty surprises down the road.

5. Additional costs associated with the car

We recommend that you consider all additional costs associated with your vehicle. These may include on-road costs, and costs for maintenance and repair of the car. A car loan calculator won’t include these factors in its calculations as these are costs that come after the loan. However, a savvy borrower would take these into account to ensure that they can comfortably afford the additional costs that come with a car. These costs can come in a variety of forms, and can come at any time. Consider:

  • Registration
  • Fuel
  • Cleaning
  • Insurance
  • Unforeseeable repairs (due to motor vehicle accidents, deterioration of the car, etc)

Oiyo’s recommended calculators 

There are many websites that offer car loan calculators for your use. Since we currently don’t have a car loan calculator on our website, Oiyo recommends trying out the following:

MoneySmart personal loan calculator

MoneySmart is a helpful tool managed by Government body, ASIC, which regulates the financial services industry. Although it’s technically for personal loans, you can still calculate repayments for a car loan via this calculator. Interest functions much the same for most car loans and personal loans.

Check it out here.

Westpac car loan calculator

Westpac’s calculator is super basic and very easy to use. If you’re just after a rough figure, this isn’t a bad tool to try out.

Give it a go here.

Heritage Bank calculators

Heritage Bank’s main car loan calculator will calculate loan repayments based on it’s own rates. However, it has some other helpful calculators you can use to work out stamp duty, car insurance, rego, and running costs.

Try it out here.

6 Tips for finding the best car loans 

  1. Calculate the car loan interest rates, either manually or using an online calculator, to see if it is affordable
  2. Consider the reputation of the lender and check whether they have good online reviews
  3. Review your own personal finances to scope out what you can afford
  4. Conduct a quick credit score history check to see how this will affect the loans being offered to you
  5. Check the additional fees that the lender may be charging you and find a lender that charges less
  6. Compare the interest rates and fees for secured and unsecured loans to see what is more viable for your situation

Disclaimer on car loan calculators

Please note that a car loan calculator is intended to be used as a guide only. However, you may use the results to make a better and more informed decision about your car loan and what you are able to afford.

Note that many calculators will not take into account additional fees and charges that may apply, nor credit score or borrowing power. Be aware that you may have to consider or add these on to the total that the calculator generates to get an accurate number. Further, once a lender verifies your application, your borrowing power may differ to what you originally believed. Consult with your lender as to what information pertains to your situation. 

Your finance journey starts here

At Oyio, we believe knowledge is power. We’re not financial advisors by any means, but we can offer helpful insights and information. Our guides are designed to make your financial journey a little bit smoother. So, whether you’re looking to borrow, compare, consolidate or refinance – Oiyo’s here to help!


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