Question 1

What taxes are included in this calculator?

Accepted Answer

This calculator includes Value Added Tax (VAT) which is currently 20% for most vehicles in the UK. Some vehicles like electric cars qualify for a reduced 5% VAT rate, while certain commercial vehicles may be exempt (0%). The calculator allows you to select the appropriate VAT rate for your situation.

Question 2

How is the monthly payment calculated?

Accepted Answer

The monthly payment is calculated using the standard amortization formula for fixed-rate loans. The formula takes into account the loan amount (vehicle price + tax - deposit), the annual interest rate, and the loan term in months. The payment remains the same each month, but the proportion going toward principal vs. interest changes over time.

Question 3

What is a typical interest rate for a UK car loan?

Accepted Answer

As of 2023, typical interest rates for car loans in the UK range from 3% to 15% APR, depending on your credit score, the loan term, and whether you're financing through a dealership or a bank. Those with excellent credit may qualify for rates under 5%, while those with poor credit may face rates of 15% or higher.

Question 4

Should I put down a larger deposit?

Accepted Answer

A larger deposit reduces the amount you need to borrow, which can lower your monthly payments and total interest paid. It may also help you qualify for better interest rates. However, you should balance this with maintaining your emergency savings and other financial priorities.

Question 5

What's better - a shorter or longer loan term?

Accepted Answer

Shorter terms (2-3 years) mean higher monthly payments but less total interest paid. Longer terms (5-7 years) lower the monthly payment but increase total interest and may mean you owe more than the car's value for longer (negative equity). The best term depends on your budget and financial goals.

UK Car Loan Calculator with Tax

Loan Details

Your Results

Payment Breakdown

Frequently Asked Questions