Car Finance Calculator: Work Out Your Monthly Car Payment & True Cost

How does car finance work?

Car finance lets you drive a car now and pay for it over time — usually 2 to 5 years — through a deposit and fixed monthly payments that include interest. At the end of the term you either own the car outright (HP, loan), pay a final balloon to keep it (PCP), or simply hand it back (leasing).

Under the bonnet, every car finance deal is a loan plus a schedule. You borrow the price of the car minus your deposit, the lender charges interest at an APR, and you repay in equal monthly instalments. The maths is identical whether the brand calls it PCP, HP or a personal loan — only the structure of the final payment changes.

Most UK car finance is one of four types: PCP, HP, leasing (PCH) and a personal loan. They differ on one thing above all — whether, and how, you end up owning the car. For the full picture, read how car finance works.

Whichever you pick, the lender must be authorised by the FCA and run an affordability check before they agree to lend. The agreement is regulated under the Consumer Credit Act 1974, which also gives you rights such as early settlement and voluntary termination on PCP and HP.

The 4 types of car finance: PCP, HP, leasing and loans

There are four main ways to finance a car in the UK, and the right one depends on whether you want to own the car and how you use it. PCP and HP are secured on the car, a personal loan is unsecured, and leasing is simply long-term rental.

PCP keeps the monthly low by deferring a big chunk of the cost — the balloon, also called the Guaranteed Minimum Future Value (GMFV) — to the end. HP clears the whole price over the term, so you own the car once the last payment lands and there's no mileage limit. A loan buys the car outright from day one, so it's yours immediately and you can sell it whenever you like.

Leasing, or Personal Contract Hire (PCH), is different: you never own the car, there's no balloon and no option to buy, and you simply return it at the end. That makes it the simplest maths but the least flexible — you walk away with no equity.

PCP vs HP: which works out cheaper?

HP usually costs less overall, while PCP keeps the monthly lower. On a £20,000 car with £2,000 down over 48 months at 9.9% APR, HP runs about £452 a month and £23,695 in total.

The same car on PCP with an £8,000 balloon drops to roughly £314 a month — but the total to own it climbs to about £25,086, because you pay interest on that balloon for the whole term. That £1,400 gap is the price of the lower monthly, and it's the single most common surprise in car finance. See it broken down in PCP vs HP.

That doesn't make PCP a bad deal — it's a deliberate trade. You're paying for a lower monthly, the flexibility to walk away, and the chance the car is worth more than the balloon at the end. But if your aim is to own the car outright for the lowest total cost, HP usually wins on the same numbers.

What is APR — and why a low monthly can cost more

APR (Annual Percentage Rate) is the yearly cost of the finance, including the interest and any compulsory fees. It's the one number that lets you compare deals fairly, whatever the headline monthly.

A lower monthly payment usually means a longer term, and a longer term means more interest charged on the same balance — so the cheapest-looking deal is often the most expensive. Stretching a £15,000 loan from 4 years to 6 years can cut the monthly by £80 but add over £1,000 in total interest. Our APR calculator turns any monthly quote back into an APR and shows the total interest; for the plain-English definition, see APR in the glossary.

Representative APR vs the APR you'll actually get

A lender's advertised 'representative APR' only has to be the rate given to at least 51% of people who go on to take the credit — it isn't a personal quote for you. Your own rate depends on your income, credit file and the car.

Under the Consumer Credit (Advertisements) Regulations 2010, a representative APR is the rate a lender reasonably expects, at the time it advertises, to give to at least 51% of the people who end up borrowing as a result of that advert. It has to appear whenever an ad states a rate or a cost-of-credit figure. It's a forward-looking estimate based on the lender's own book, not a promise — and it says nothing about what you, individually, will be offered.

That leaves up to 49% of successful applicants on a different rate, which can be higher. If your credit file is thinner or your income lower than the lender's typical customer, expect the number on your actual offer to move — sometimes by several percentage points. Compare offers on the APR, not the monthly, using our APR calculator, and see what APR means if the term itself is new to you.

How much car finance can you get?

How much you can borrow depends on your income, your outgoings and your credit file — not a fixed limit. Lenders run an affordability check under FCA rules, weighing what you can comfortably repay each month.

There's no universal cap, but as a rough guide a £250 monthly budget over four years at 11.9% APR finances roughly a £10,620 car with a £1,000 deposit. Our eligibility estimate works out an indicative amount from a monthly budget, with no credit check and no impact on your file.

The biggest lever on how much you can borrow — and the APR you're offered — is your credit score. Improving it before you apply can unlock a higher borrowing figure and a noticeably cheaper rate. See what credit score you need.

Soft search vs hard credit search: how checking your eligibility works

A soft search is visible only to you and the credit reference agency, so it has no effect on your credit score — a hard search is visible to other lenders and can affect it. Car finance 'check your eligibility' tools use a soft search; the real application uses a hard one.

These aren't legal terms — no statute defines 'soft' or 'hard' search, only consistent industry practice across the major credit reference agencies. A soft search looks at your file without leaving a trace other lenders can see, which is why eligibility checkers and 'get your rate' tools can safely run one against every lender you compare, with zero impact on your score. Submitting an actual application moves to a hard search, which other lenders can see and which can stay on your file for up to two years.

A single hard search barely moves your score — the real risk is several in a short space of time, which can make you look like you're struggling for credit. Shop around with soft-search tools first, such as our eligibility estimate, and only submit a full application to the lender you actually want.

Your right to withdraw, and your right to settle early

Two statutory rights sit either side of a regulated PCP, HP or loan: 14 days to withdraw for any reason after you sign, and the right to settle early at any point afterwards. Both come from the Consumer Credit Act 1974.

The settlement rebate is worked out from a fixed "settlement date," set by regulation 5 — 28 days after the creditor receives your settlement notice. The creditor can then push that date back further under regulation 6 — a further month (or 30 days), but only where the agreement's original term is more than a year — often described as the lender charging "extra interest" for the delay. That's not quite right: it isn't a fee bolted onto your bill, it's a later date fed into the same statutory rebate formula, so what moves is the point the rebate is calculated from, not the formula itself.

• 14-day right to withdraw: under Consumer Credit Act 1974, section 66A, you can pull out of a regulated agreement without giving a reason, up to 14 days after the latest of: the day the agreement is made, the day the credit limit is notified, or the day you receive a copy of the executed agreement. You still have to repay any credit already provided plus interest accrued at the agreement's contractual rate — no compensation, fees or charges, within 30 days — it's a cooling-off right, not a free trial. It doesn't apply if the credit exceeds £60,260 (other than a residential renovation agreement), or the agreement is secured on or for the purchase of land.
• Early settlement rebate: from then on, you can pay off the balance at any time and receive a statutory rebate of the interest you haven't yet been charged. Work out your figure on the settlement calculator.

Already paying? How to settle or change your deal

You can end most car finance early — settle it in full, overpay to clear it faster, hand it back, or sell the car. Your rights come from the Consumer Credit Act 1974 and apply to PCP and HP.

Each route has its own maths. Settling in full is a single lump sum that wipes out future interest; overpaying does the same job gradually; voluntary termination lets you walk away at the 50% mark with nothing more to pay (subject to condition and mileage terms on PCP).

• Settle in full: pay the outstanding balance now and save the remaining interest, with a statutory rebate. Work it out with the settlement calculator.
• Overpay: put extra in each month to cut the interest and shorten the term — see overpaying car finance.
• Voluntary termination: hand a PCP or HP car back once you've paid 50% of the total amount payable — see voluntary termination.
• Sell or part-exchange: settle the finance from the sale and keep any equity. Watch for negative equity if the car is worth less than you owe.

Mis-sold car finance: could you be owed money?

Millions of UK car finance agreements taken out between 2007–2024 may have been mis-sold through hidden discretionary commission. If yours was, you may be owed redress — and you can claim free yourself.

The FCA finalised a motor finance redress scheme (PS26/3) on 30 March 2026, after the Supreme Court ruled on commission disclosure on 1 August 2025. The scheme is legally challenged from 1 May 2026 (the FCA is defending), which may affect timing but not eligibility. The scheme expects to return around £7.5 billion in redress across roughly 12.1 million agreements, an average of about £829 each. Check your position with our compensation estimator and read the scandal explained. We also have independent explainers for major lenders, including Black Horse car finance.

Every figure on this is an estimate, not a promise — the scheme decides eligibility and the exact amount. And you can claim free yourself, directly with your lender and the Financial Ombudsman, with no claims firm taking up to about a 36% cut. For the latest dates as the scheme rolls out, see our car finance claims news and the full redress timeline.