Your car loan repayment depends mainly on how much you borrow, your interest rate and how long you take to repay the loan. A $20,000 car loan could have a very different weekly repayment from a $40,000 loan, while changing the interest rate or loan term can also make a noticeable difference. This guide uses simple repayment examples to show how car finance repayments can change and what to compare before choosing a loan.
Key takeaways
- ✓Your loan amount, interest rate and loan term are three of the biggest factors affecting your regular car loan repayment.
- ✓A larger loan generally means a larger repayment when the rate and term stay the same.
- ✓A longer loan term can reduce the regular repayment but may increase the total interest paid.
- ✓A lower interest rate can reduce both repayments and total borrowing cost.
- ✓Compare fees and total amount repayable as well as the weekly repayment.
Car loan repayments in NZ at a glance
The table below shows indicative weekly repayments for different car loan amounts using an example interest rate of 9.95% p.a. over five years. These examples are designed to show how repayments change as the amount borrowed increases. They are not quotes or an indication that a particular borrower will qualify for these amounts or this rate.
At an illustrative 9.95% p.a. over five years, a $20,000 loan is about $98 a week, while a $30,000 loan is about $147 a week. Actual repayments depend on the rate, fees, term and loan you receive.
| Loan amount | Example rate | Loan term | Approx. weekly repayment |
|---|---|---|---|
| $10,000 | 9.95% p.a. | 5 years | $49 |
| $15,000 | 9.95% p.a. | 5 years | $73 |
| $20,000 | 9.95% p.a. | 5 years | $98 |
| $25,000 | 9.95% p.a. | 5 years | $122 |
| $30,000 | 9.95% p.a. | 5 years | $147 |
| $40,000 | 9.95% p.a. | 5 years | $195 |
| $50,000 | 9.95% p.a. | 5 years | $244 |
How are car loan repayments calculated?
Car loan repayments are based on the amount financed, the interest charged and the repayment period. The lender calculates a repayment schedule designed to repay the loan according to the terms of the credit contract. Fees or other amounts included in the finance can also affect what you ultimately repay.
The amount you borrow
The amount financed has a direct effect on your repayment. If the interest rate and loan term remain the same, financing $40,000 will require substantially larger repayments than financing $20,000. A deposit or trade-in can reduce the amount that needs to be financed.
How much does the interest rate change your repayment?
The interest rate determines how much interest accrues on the outstanding loan balance. Even when the loan amount and term are identical, different rates can produce different repayments. The table below compares a $30,000 loan over five years at several illustrative rates.
The interest rate matters even when you borrow exactly the same amount. Comparing rates can therefore change both your regular repayment and the overall cost of the loan.
| Loan amount | Interest rate | Term | Approx. weekly repayment |
|---|---|---|---|
| $30,000 | 7.95% p.a. | 5 years | $140 |
| $30,000 | 9.95% p.a. | 5 years | $147 |
| $30,000 | 11.95% p.a. | 5 years | $153 |
| $30,000 | 13.95% p.a. | 5 years | $160 |
| $30,000 | 15.95% p.a. | 5 years | $167 |
How does the loan term affect repayments?
The loan term is the period over which the debt is scheduled to be repaid. Extending the term spreads the loan across more repayments, which generally reduces the amount due each week. The trade-off is that interest may be charged for longer.
| Loan amount | Example rate | Term | Approx. weekly repayment |
|---|---|---|---|
| $30,000 | 9.95% p.a. | 3 years | $223 |
| $30,000 | 9.95% p.a. | 4 years | $175 |
| $30,000 | 9.95% p.a. | 5 years | $147 |
| $30,000 | 9.95% p.a. | 6 years | $128 |
| $30,000 | 9.95% p.a. | 7 years | $114 |
Does a lower weekly repayment mean a cheaper loan?
Not necessarily. A lower weekly repayment can simply mean the loan is being repaid over a longer period. Although that may make the regular payment easier to manage, extending the term can increase the amount of interest paid over the life of the loan.
Weekly repayment and total loan cost measure different things. Check both before deciding which loan structure suits you.
Weekly vs fortnightly vs monthly car loan repayments
Car finance repayments may be displayed weekly, fortnightly or monthly depending on the lender and agreement. A smaller-looking weekly number does not automatically mean one loan is cheaper than another. When comparing options, convert them to the same repayment frequency or compare the total amount repayable.
What else can be included in your car loan repayment?
The interest rate is not necessarily the only cost associated with vehicle finance. Depending on the loan, there may be establishment fees, administration fees or other charges. If fees are financed as part of the loan rather than paid separately, they can increase the amount being repaid.
| Cost | What to check |
|---|---|
| Interest | The rate applying to the loan and how interest is calculated. |
| Establishment fee | Any cost charged to establish the finance. |
| Administration fees | Whether regular account or administration charges apply. |
| Early repayment costs | Whether charges may apply if you repay the loan early. |
| Default costs | What happens if a repayment is missed or made late. |
Why the total amount repayable matters
A weekly repayment is useful for budgeting, but it does not tell you the complete cost of the loan. Two loans can have similar regular repayments while having different terms, fees or total interest costs. Your credit disclosure should provide information about repayments, interest, fees and the total cost of the credit.
Should you choose the smallest repayment available?
The smallest repayment is not automatically the best option. A repayment needs to be affordable, but it is also worth considering how long you will be making payments and how much the finance will cost overall. The aim is to find a repayment structure that fits your budget without ignoring the total cost.
What car loan repayment can you afford?
A repayment that looks manageable on its own still needs to fit alongside rent or mortgage payments, food, utilities, existing debt and other regular expenses. Vehicle ownership also creates costs beyond finance, including insurance, fuel or charging, servicing, registration, WOFs, tyres and repairs.
Consider the car repayment as part of your complete household and vehicle budget, rather than deciding affordability from the repayment figure alone.
What happens if you cannot afford the repayments?
If you are having difficulty making repayments, contact the lender as early as possible rather than allowing missed payments to accumulate. Depending on the circumstances, options may include discussing a repayment arrangement or applying for hardship. If the vehicle secures the loan, serious repayment problems can ultimately put the vehicle at risk.
How to compare car loan repayments properly
For a meaningful comparison, try to compare finance options using the same amount borrowed and a similar loan term. Then look beyond the regular repayment and compare the rate, fees, total amount repayable and important loan conditions.
| Compare | Why |
|---|---|
| Loan amount | Make sure you are comparing the same amount financed. |
| Interest rate | Different rates change repayments and interest cost. |
| Loan term | A longer term can make the regular repayment look smaller. |
| Fees | Fees can increase the true cost of borrowing. |
| Regular repayment | Check whether it fits your budget. |
| Total amount repayable | Shows more of the overall cost than the weekly figure alone. |
Can you reduce your car loan repayments?
The repayment required under an existing credit contract is determined by that agreement, so you cannot simply choose to pay less. Before taking out finance, however, reducing the amount borrowed, obtaining a lower rate where available or choosing a different term can change the scheduled repayment. If you are already struggling with repayments, contact the lender rather than changing payments yourself.
Compare car loan rates and repayments
The same vehicle price can produce different repayments depending on how much you finance, the rate available to you and the loan term. Comparing finance options on the same basis makes it easier to see those differences. EveryLoan refers visitors to Simplify Finance, where applications, lender matching, credit decisions and funding are handled by Simplify Finance and its lender partners.
EveryLoan is not a lender. Actual rates, repayments, approval and loan terms depend on the finance available through the lender assessment process.
Frequently asked questions
As an illustrative example, $20,000 financed for five years at 9.95% p.a. is approximately $98 per week before fees. Your actual repayment will depend on the interest rate, term, fees and loan structure available to you.
At an illustrative 9.95% p.a. over five years, a $30,000 loan is approximately $147 per week before fees. Different rates or terms will change the repayment.
At an illustrative 9.95% p.a. over five years, a $50,000 loan is approximately $244 per week before fees. This is an example only and is not a finance quote.
The best repayment frequency depends on the loan terms and what works with your budget. When comparing loans with different repayment frequencies, compare the underlying rate, fees, term and total amount repayable rather than relying on the size of one payment.
A longer term generally reduces the regular repayment because the loan is spread over more payments. However, it can also result in more interest being paid overall.
They can. If fees or other costs are added to the amount financed, the balance being repaid can increase. Check the disclosure documents for the fees applying to the loan.
Whether and how you can make additional part repayments depends on your credit contract. New Zealand law requires lenders to accept full prepayment, while part prepayments may be restricted if the contract allows it. Fees can also apply, so check with the lender first.
Contact your lender as early as possible. Depending on your circumstances, you may be able to discuss a repayment arrangement or apply for hardship. Avoid simply stopping payments without contacting the lender.