The true cost
Flat Rate to APR Converter
Convert a flat interest rate into a representative APR so you can compare deals fairly.
Representative APR
9.6%
roughly double the flat rate
Monthly payment
£375.00
Flat rate vs APR
- Total interest
- £3,000
- Total payable
- £18,000
A flat rate charges interest on the whole amount for the whole term, so the true APR is almost always higher. Always compare deals on APR.
How we work this out
Flat-rate interest = amount × flat rate × years. Total payable = amount + flat interest; monthly = total payable ÷ months. We then solve for the APR that matches that monthly on a reducing balance: amount = monthly × (1 − (1 + i)^−term) ÷ i, then APR = (1 + i)^12 − 1.
The APR is always higher than the flat rate because you keep paying interest on the full amount even as the balance falls. Always compare on APR.
Full method: how we calculate.
A flat rate charges interest on the full original amount for the whole term, so the true cost — the APR — is always higher, usually almost double. This converter turns a flat rate into a representative APR so you can compare car finance deals fairly.
A flat rate always looks cheaper than it is. Enter the flat rate, the amount and the term above to see the real APR and the total interest you would actually pay.
What is a flat rate?
A flat rate charges interest on the full amount you borrowed for the whole term, even as you pay the balance down. That makes it look cheaper than it is — the real cost is the APR.
With a reducing-balance rate, interest is charged only on what you still owe, so it falls as you repay. A flat rate ignores that and charges the same interest every month, which is why the APR ends up far higher than the flat rate quoted.
Why a flat rate looks cheaper than it is
A flat rate looks cheaper because the number is smaller, but you pay interest on money you have already repaid. A 5% flat rate works out close to a 9.6% APR.
Worked example
Flat rate vs APR compared
The flat rate and the APR describe the same deal, but only the APR shows the true cost. A flat rate is roughly half the APR for a typical term.
The total interest is the same — what differs is which number you compare on. By law, UK lenders must quote a representative APR, so always compare deals on that. Run any monthly quote through the APR calculator to check.
| Flat rate | Representative APR | |
|---|---|---|
| Rate quoted | 5% | ≈ 9.6% |
| Total interest | £3,000 | £3,000 |
| What it measures | Interest on the full amount | True annual cost on the balance |
Always compare car finance on APR
Compare every car finance deal on its representative APR, never the flat rate or the monthly. It is the only number that lets you weigh deals fairly.
- A low flat rate can hide a high APR — always convert it first.
- A low monthly can mean a long term and more total interest — check the total amount payable.
- The representative APR includes compulsory fees, so it captures the true cost in one figure.
How to cut the true cost
You cut the true cost the same way whatever the rate is quoted: a bigger deposit, a shorter term and a lower APR. Each one lowers the total interest you pay.
See how a deposit and term change the figures, then make sure you are comparing on APR. A genuinely 0% deal is the exception — but check it really beats a cash discount.
Was a hidden rate added to your finance?
Some car finance from 2007–2024 carried hidden commission that quietly raised your interest rate. If yours did, you paid more than the rate you agreed, and you may be owed redress.
The FCA's redress scheme follows the Supreme Court ruling of 1 August 2025. Estimate your position with the compensation estimator — an estimate, not a promise, and free to claim yourself.
Frequently asked
What is a flat rate?
Why is APR higher than the flat rate?
How do I convert a flat rate to APR?
Should I compare car finance on flat rate or APR?
Is a flat rate ever a good deal?
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