Question 1

How is a car loan monthly repayment calculated?

Accepted Answer

Your monthly repayment is determined by the amount financed (purchase price minus deposit), the annual interest rate, and the loan term. If a balloon payment is included, the monthly repayment is lower because a lump sum remains due at the end of the term.

Question 2

What is a balloon payment on a car loan?

Accepted Answer

A balloon payment (also called a residual value) is a lump sum due at the end of a car loan term. It reduces the monthly instalments during the loan but must be paid in full — or refinanced — when the term ends.

Question 3

Does a balloon payment save money on a car loan?

Accepted Answer

A balloon payment lowers monthly instalments but increases total interest paid, because the outstanding balloon balance continues to accrue interest throughout the loan term. Use the calculator to compare the total cost with and without a balloon.

Question 4

Should I use a balloon payment on my car loan?

Accepted Answer

A balloon payment makes sense if you need lower monthly instalments and are confident you can settle the residual at the end of the term — whether by refinancing, trading in, or paying cash. If you plan to keep the vehicle and can afford the full repayment, no balloon is usually cheaper overall since you pay less total interest. Use the calculator to compare both scenarios before deciding.

Question 5

How do bank fees affect my car loan cost?

Accepted Answer

Bank fees on a car loan typically include a once-off initiation fee and a monthly administration fee. These increase the total cost of credit beyond the stated interest rate. The effective annual rate (APR) captures this — it is the single rate that equates the present value of all your payments (including fees) to the loan amount. Even a modest initiation fee can add meaningfully to the total cost over a short loan term.

Question 6

What does the vehicle depreciation chart show?

Accepted Answer

The depreciation chart compares your estimated vehicle market value against your outstanding loan balance month by month. When the loan balance exceeds the vehicle's value, you are in negative equity — meaning you owe more than the car is worth. This is common early in a loan, especially with a balloon payment or low deposit. The chart helps you identify when you return to positive equity.