New Car Finance Calculator

How does new car finance work?

New car finance spreads the cost of a brand-new car over monthly payments, through PCP, HP or a personal loan. Rates are often lower than on used cars, and manufacturers frequently add deposit contributions or 0% deals.

PCP is the most popular way to finance a new car, because the monthly is low and you can change car every few years. The catch is the balloon — see exactly how it works on the balloon payment calculator.

PCP, HP or a loan on a new car?

PCP keeps the monthly lowest and lets you swap car often; HP and a loan cost less overall and end with you owning it. New cars are where PCP makes the most sense.

PCP is built for new cars: low monthly, optional balloon, change car every 2–4 years. HP costs more monthly but you own the car outright at the end. A personal loan buys the car from day one with no mileage limits.

A worked example on a new car

A £30,000 new car on PCP with £3,000 down, a £14,000 balloon, over 48 months at 8.9% APR costs about £421 a month — but around £37,189 in total to own. The same car on HP costs more monthly but less overall.

New car finance: PCP vs HP

On a new car, PCP wins on the monthly and HP wins on the total cost to own. Your choice depends on whether you want to keep the car or change it.

If you plan to keep a new car long term, HP or a loan costs less. If you like changing car often, PCP suits you. Weigh it up in PCP vs HP.

New cars and depreciation

A new car loses value fastest in its first few years, which is why PCP balloons and negative equity matter most here. The balloon protects you from some of that drop, but not all.

A new car typically loses 15–35% of its price in the first year alone, and a further chunk in years two and three. That early fall is the single biggest cost of owning a new car — bigger than the fuel, the tax or the insurance, even though it never appears on a monthly statement.

On PCP the balloon is the lender's own prediction of what the car will be worth at the end, so the Guaranteed Minimum Future Value shields you from that drop: if the car is worth less than the balloon, you can simply hand it back. Check where you would stand with the negative equity calculator. A bigger deposit also cushions the early depreciation, because you start the agreement owing less relative to the car's falling value.

Manufacturer deposit contributions and 0% APR deals

A manufacturer deposit contribution is genuine money off the car, and a 0% APR deal charges no interest — but both are usually tied to taking the dealer's finance, and a cash buyer often forgoes a discount in return. Always run the numbers before you accept.

A £2,000 deposit contribution lowers your amount financed by £2,000, which lowers the monthly and the total. That is real money off, and it is why PCP can look cheap on a new car. The catch is that the contribution usually requires you to take the manufacturer's own finance at their rate — so a cheap-looking deal can hide a higher APR that adds back the saving over the term.

A 0% APR deal is exactly what it says: no interest, so the total amount payable equals the price. The trade-off is that 0% finance is rarely combined with a cash discount, so a buyer who could pay cash or borrow cheaply elsewhere may end up paying more for the car itself. Run any quote through the APR calculator to see the true cost, and weigh a 0% deal against a cash price on the 0% car finance deals page.

First-year VED and the expensive car supplement

The first year's road tax (VED) on a new car is set by its CO2 emissions, and any car with a list price over £40,000 pays an extra £410 a year for years two to six. That can add hundreds a year to the true cost of owning a new car.

The first-year VED rate ranges from £0 for zero-emission cars up to over £2,000 for the highest-emitting petrol and diesel cars. From year two onwards, most petrol and diesel cars pay a flat standard rate of around £190 a year. Electric cars moved onto the standard rate from April 2025, so the era of free road tax for EVs has ended.

The expensive car supplement adds £410 a year for five years to any car with a list price above £40,000, on top of the standard rate. That is £2,050 over the supplement window, and it applies even to low-emission cars. If you are financing a £42,000 car, budget for that extra cost — it sits on top of the finance in the true cost of ownership.

Build the tax into your running costs on the total cost of ownership calculator, so the real monthly figure includes it.

PCP on a new car — the typical cycle

The typical new-car PCP cycle runs three to four years, with any equity at the end rolling into the deposit on the next car. It works smoothly while used values hold; it breaks down when values fall.

On a new-car PCP you pay the monthly for the term, then at the end you pay the balloon, hand the car back, or part-exchange any equity above the balloon. That equity — the difference between the car's real value and the balloon — becomes the deposit on your next PCP, which is how drivers stay on a new car every three or four years without finding a fresh lump sum.

The cycle depends on the car being worth at least the balloon at the end. When used values hold, you build equity and the next deal is cheaper. When values fall sharply — as they did across many new cars in 2022–2023 — the equity disappears and you may have nothing to roll over. Work out your equity position before the agreement ends on the part-exchange calculator.

Ordering a new car — lead times and the finance quote

A new-car finance quote is usually valid for about 30 days, and if delivery slips the lender may re-quote the rate when you collect. Factor lead times into your decision, especially on factory-ordered cars.

Factory-ordered new cars can take several months to arrive, and during that wait the deposit contribution, the APR or the balloon offer can change. A quote locked in at order is generally honoured if you collect within its validity window, but a long delay can push you past that window and onto a new quote — sometimes a worse one.

Ask the dealer in writing how long the quote is valid and what happens if delivery is late. If the rate rises between order and delivery, the total amount payable rises too, so re-run the figures on this calculator with the new APR before you sign at handover. A personal loan with a fixed rate can sidestep this, because the rate is locked when the loan completes.

New vs used — total cost over four years

A new car carries a lower APR but a far higher price, so the total cost over four years is usually much larger than a comparable used car — even with the lower rate and the incentives. Compare the totals, not the rates.

The used car costs roughly half as much in total over four years, even at a higher APR, because you are financing a much smaller amount and taking on less of the steep first-year depreciation. The new car buys you the lower rate, the warranty, and the incentives — but you pay for them in the total. See the full breakdown on the used car finance calculator.

Was your new car finance mis-sold?

New car finance from 2007–2024 can carry hidden-commission claims too. If a broker or dealer raised your rate for a bigger commission, 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.

A dealer incentive like a deposit contribution does not rule out a claim — the hidden commission sat in the interest rate you were charged, which raised the total you paid whatever the headline offer.