How We Calculate: Methodology & Sources
The formulas behind our calculators and the sources we rely on — independent and transparent.
Every calculator on this site uses standard, published finance formulas, and we show exactly how they work. Here's the maths, the assumptions, and the sources behind the figures — so any number you see on CarFinanceCalculator.uk is one you can check and reproduce.
Nothing here is invented, proprietary, or shaped by a lender. We use the same amortisation maths that sits behind any regulated consumer credit agreement in the UK, and we express every result in both the monthly payment and the total amount payable, because the total is the figure that exposes an expensive deal.
How we work out monthly payments
We convert the APR to a monthly rate, then amortise the amount you finance over the term.
The monthly rate is (1 + APR)^(1/12) − 1. The amount financed is the car's price minus your deposit. For HP and personal loans we spread the whole amount over the term; for PCP we defer the balloon (GMFV) to the end, which is what keeps the monthly lower than an equivalent HP deal on the same car.
This is standard amortisation — the same maths that governs every regulated UK credit agreement under the Consumer Credit Act 1974. The APR is the yearly cost of borrowing including compulsory fees, and converting it to a monthly rate lets us spread the balance plus interest evenly across the term. There's no hidden adjustment; the formula is the formula.
The core formula
How we work out APR, settlement and the rest
The reverse-APR, settlement, overpayment and affordability tools all use the same present-value maths.
Every tool on the site runs on the same underlying relationship: the amount financed equals the present value of the payments, discounted at the interest rate. Change any one of those three — amount, payments, or rate — and the maths solves for the other. That's why a reverse-APR tool works: give it the monthly and the term, and it finds the rate that balances the equation.
- APR: we solve for the rate that makes your payments' present value equal the amount financed — so a monthly quote becomes a true APR and a total.
- Settlement: the present value of the remaining payments at your contract rate, reflecting the statutory rebate of interest under the Consumer Credit Act 1974.
- Overpayment: we re-run the amortisation schedule with your extra payment and compare the interest and the months saved.
- Affordability: we work backwards from a monthly budget to an indicative amount you could borrow, using the same present-value relationship in reverse.
- Balloon (GMFV): the projected final payment on a PCP, shown as a lump sum due at the end of the term.
What 'total amount payable' means and why we show it
The total amount payable is your deposit plus every payment plus any balloon and fees — the full cost of the deal in pounds. We show it on every calculator because it's the figure that exposes an expensive deal.
A monthly payment tells you what leaves your account each month; the total tells you what the car actually costs you by the end. Two deals with identical monthly payments can differ by thousands in total, because a longer term hides more interest. Our calculators always show both, so a cheap-looking monthly can't disguise a dear total.
This is the single most important habit we're trying to build: compare on the total, not the monthly. The APR & true-cost calculator exists to turn any quote back into a total amount payable for exactly this reason — it's the honest unit of comparison across any product, any term, any lender.
Our assumptions
We assume a fixed-rate, fixed-term agreement with no missed payments, no early settlement, and fees included in the APR where the deal requires them.
These assumptions matter because real life is messier. Your actual payment could differ if your rate is variable, you settle early, you miss a payment, or the lender adds fees we haven't assumed. The calculators are a comparison tool, not a quote — use them to see which deal is cheaper, then confirm the exact figures with the lender before you sign.
- Fixed rate: the APR doesn't change over the term. Variable rates exist but are rare on UK car finance, and a fixed rate keeps the comparison clean.
- Fixed term: you make every payment on schedule, with no early settlement, payment holidays, or missed months.
- Compulsory fees: any fee you must pay to take the deal (such as an option-to-purchase fee on HP) is included, because it's part of the true cost.
- No optional extras: insurance, GAP, service plans and the like are excluded unless you've added them, because they're not part of the finance itself.
Our sources
We base our maths and our rights content on the regulator and the law, not on lenders.
When a page states a fact about your rights — voluntary termination, early settlement, the redress scheme — that fact traces back to one of these sources, not to a lender's FAQ. We cite the source on the page, and we refresh the regulated facts as the FCA's work develops. You can verify any of them directly with the regulator.
- The Financial Conduct Authority (FCA) for affordability rules, consumer credit standards, and the motor-finance commission redress scheme running through 2026.
- The Consumer Credit Act 1974 for early settlement, the statutory rebate of interest, and the right of voluntary termination at 50%.
- The UK Supreme Court ruling of 1 August 2025 on the commission-disclosure position that triggered the FCA's redress work.
- MoneyHelper and the Financial Ombudsman Service for the regulated help we signpost when our information isn't enough.
How we review and update our figures
We review every calculator's logic on a regular schedule, and we refresh our claims and redress pages as the FCA's motor-finance work develops through 2026.
The amortisation maths doesn't change — it's been the same for decades. What does change is the regulatory landscape: the FCA's motor-finance commission redress scheme is moving through 2026, the Supreme Court's 1 August 2025 ruling reshaped the commission-disclosure position, and affordability rules evolve. Our claims and redress pages carry a visible 'last updated' date so you know how fresh the figure is, and we fact-check regulated facts before each publish.
If you spot a figure that looks stale or wrong, tell us — see contact us. We'd rather correct something than leave it standing.
Worked example: how the maths produces a figure
Take a £20,000 car at 9.9% APR over 48 months with a £2,000 deposit. The formula produces a £452 monthly payment and a £23,695 total — here's exactly how.
Notice that the APR isn't simply divided by 12 to get the monthly rate — that would understate the compounding. Instead we take the 12th root of (1 + APR), which correctly converts the annual rate to its monthly equivalent. This is the standard approach under the Consumer Credit Act 1974 and the reason our figures match what a regulated lender would show on a quote.
For a PCP, the same maths applies, but we subtract the present value of the balloon from the amount financed before amortising. On a £20,000 car with a £2,000 deposit and an £8,000 balloon, we amortise (£18,000 − present value of £8,000 in 48 months), which is why the monthly drops to about £314. The balloon is then paid as a lump at the end if you keep the car.
Worked example, step by step
Limitations: what our calculators can't see
Our calculators can't see your credit file, the lender's exact fees, or the car's real price — so our figures are accurate for comparison, not a guarantee of what you'll pay.
These limitations don't make the calculators useless — they make them comparison tools. The figures are accurate for 'deal A vs deal B on the same assumptions', which is exactly the comparison you need to make before signing. When you have a real quote, plug its exact numbers into the APR and true-cost calculator to see its true cost, and use that — not the headline — to decide.
- Your credit file: the APR you're actually offered depends on your credit history, which we don't see. Our calculators use the APR you enter.
- Lender fees: some agreements include fees we may not have accounted for (documentation fees, option-to-purchase fees). We include compulsory fees where known, but check the quote.
- The real car price: the on-the-road price can differ from the sticker, with delivery, registration, and optional extras. Our figures use the price you enter.
- Variable rates: a small number of agreements have variable rates. We assume fixed, which is the norm for UK car finance.
- Your payment pattern: missed payments, payment holidays, or early settlement all change the actual cost. We assume perfect on-time payment.
What the figures are — and aren't
Our results are estimates based on the figures you enter, to help you compare — not a quote or financial advice.
Your real deal depends on the lender, your credit file, the car, and the exact fees in the agreement, none of which our calculators can see. The numbers are accurate for comparing one deal against another on a like-for-like basis; they are not an offer of finance, a guarantee of what you'll pay, or a recommendation to take any particular deal.
For regulated help, contact MoneyHelper or the Financial Ombudsman Service. For a real quote, speak to an FCA-authorised lender or broker. For everything else — understanding the maths, comparing products, seeing the true cost — that's what we're here for.
Frequently asked
How accurate are your car finance calculators?
What sources do you use?
What formula do you use for monthly payments?
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Why might my real payment differ from the calculator?
How often do you update the calculators and content?
Sources
We cite regulators and official UK sources only.
- MoneyHelpermoneyhelper.org.uk
- Financial Ombudsman Servicefinancial-ombudsman.org.uk
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