How to use a car finance calculator

Find out the best car you can get for your budget by getting a quote through a car finance calculator

Christofer Lloyd
Aug 31, 2021

Car finance can be baffling, but getting a quote is becoming easier and easier, with more and more online calculators showing you what you can afford in an instant. Typically car finance calculators can provide Personal Contract Purchase (PCP) finance and Hire Purchase (HP) quotes.

PCP finance lets you run the car for the length of the contract and then decide whether you want to hand the keys back with nothing left to pay - provided you’ve stuck to the pre-agreed mileage limit and kept the car in good condition - or make an optional final payment to take ownership.

With Hire Purchase, however, you make higher monthly payments but automatically own the car at the end of the contract, with nothing more to pay.

It’s not just the type of finance you choose that affects your monthly payments. Keep reading to understand how to use a car finance calculator to get a quote that suits your needs.

Select deposit, contract length, and mileage allowance with a car finance calculator

Finance calculators can be invaluable in helping you to work out which car best suits your budget and requirements, because the monthly deposit can vary hugely depending on the amount of deposit you put down, or how long you wish to make the payments over.

The main factor which affects your monthly payments is the car’s cash price - and how much it’s expected to be worth at the end of the contract with PCP. The higher the price - and the more value it loses, the higher you can expect your monthly payments to be.

Increase your deposit to lower your monthly payments

Similarly, the deposit you put down fundamentally affects your monthly bills. Put nothing down upfront and a £15,000 car could cost you around £250 per month, but pay £5,000 initially and that figure tumbles to around £90 per month without changing anything else.

Paying a large deposit upfront also reduces the total amount of interest you pay - provided it’s not an interest-free credit deal, where it makes no difference. As a result, if you’re on a tight monthly budget, but have a reasonably large amount of cash initially, increasing your deposit could help you get the car you want for an affordable monthly payment.

Longer contracts mean lower monthly payments

If you’re happy to run the car for longer, this can be an easy way to reduce your monthly payments. Opting for a four-year contract rather than a two-year one could mean the difference between paying £300 every month and paying £200 per month for the same car.

If you’re open to different options, using a finance calculator to gauge the difference in costs can be a very quick way to either shrink your monthly payments or to get a better car for your monthly budget.

Opting for a lower mileage allowance means smaller monthly bills

The more you drive your car, the higher you can expect your monthly payments to be with PCP finance, because the higher the car’s mileage when you hand it back, the less it will be worth. This makes it important to accurately gauge your likely mileage when getting a finance quote.

If you’re super cautious and select 30,000 miles as your annual mileage - even if you don’t expect to drive that far - you could pay far more every month. The same £15,000 car that could be just £167 per month with a 6,000-mile-per-year limit rockets to £272 per month on a 30,000-mile-per-year contract.

Don’t wildly underestimate your mileage, however, as you can expect to be issued excess mileage charges for exceeding the pre-agreed limit. These typically exceed what you’d pay for signing up to a higher-mileage contract, so it’s best to gauge your mileage as accurately as possible.

See how your credit rating affects your payments with a car finance calculator

Not everyone can have the best credit rating, but you can see how much of a difference it makes to your monthly payments when using many car finance calculators.

If you don’t need to trade up to a new car just yet, this could be a good incentive to hold off and work on improving your credit rating. This should mean that when it comes time to get another car you’ll have lower monthly payments as the finance company sees you as a lower risk.

There are plenty of ways to check your credit score, and to judge whether it's good enough to finance the car you want. You can take these steps to maximise your chances of being approved, and you needn't necessarily be discouraged if you don't have a credit history.


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