Samenvatting
A car affordability calculator helps you answer two questions: “How much car can I afford?” given a monthly budget, and “Which finance option is cheapest?” when comparing PCP, HP, and bank loans. All three finance types use the same underlying loan formula — what differs is the amount financed and whether there’s a balloon payment at the end.
Hoe het werkt
Affordability mode
Given a monthly payment you can afford, the calculator works backwards from the loan formula to find the maximum loan amount, then adds your deposit to get the maximum car price.
Loan comparison mode
Given a specific car price, the calculator computes the monthly payment, total cost, and total interest for three common UK finance options:
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Hire Purchase (HP) — You borrow the full amount (minus deposit) and repay in equal monthly instalments. At the end, you own the car. No mileage limits or condition charges.
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Personal Contract Purchase (PCP) — You borrow the amount minus deposit minus the balloon payment (also called the Guaranteed Minimum Future Value or GMFV). Monthly payments are lower because you’re only financing the depreciation. At the end of the term, you can: pay the balloon to keep the car, return it, or trade it in. Mileage limits and condition charges apply.
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Bank personal loan — A standard unsecured loan from a bank or building society. Often the cheapest option for borrowers with good credit. You own the car outright from day one.
Depreciation model
The calculator also models how a car loses value over time. New cars depreciate fastest in the first year, then the rate gradually slows. The model uses industry-average rates based on data from CAP HPI and Motorpoint:
| Year | Depreciation rate | Cumulative retention |
|---|---|---|
| 1 | 25% of purchase price | ~75% |
| 2 | 18% of previous value | ~62% |
| 3 | 17% of previous value | ~51% |
| 4 | 13% of previous value | ~44% |
| 5 | 12% of previous value | ~39% |
| 6–7 | 10% of previous value | ~32–35% |
These are averages. Premium brands (Porsche, Toyota) depreciate slower; high-volume models may depreciate faster.
De formule
Monthly loan payment
Where
This is the standard amortising loan formula used by all UK lenders for HP and bank personal loans.
Maximum affordable loan
To find the maximum you can borrow, rearrange the formula:
Where
Then: Maximum car price = P ÷ (1 − deposit%/100)
PCP finance amount
For PCP, the amount financed is reduced by the balloon payment:
PCP financed amount = (Car price − deposit) − balloon payment
The balloon payment is typically 30–50% of the original car price, set by the lender based on predicted residual value.
Worked examples
Example 1: How much car can I afford?
£300/month budget, 20% deposit, 6.9% APR, 5-year term
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Result
Example 2: Comparing finance on a £20,000 car
£20,000 car, 20% deposit (£4,000), comparing HP vs PCP vs bank loan
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Result
Verificatie
| Scenario | Calculator output | Manual calculation | Match? |
|---|---|---|---|
| £10k loan, 6.9%, 5yr | £197.54/mo | £197.54/mo | ✅ |
| £300/mo → max car (20% dep, 6.9%, 5yr) | £18,983 | £18,983 | ✅ |
| £20k car, HP 6.9% 5yr | £316.06/mo | £316.06/mo | ✅ |
| £20k car, PCP 5.9% 4yr 35% balloon | £210.95/mo | £210.95/mo | ✅ |
| £20k car, Bank 4.9% 5yr | £301.21/mo | £301.21/mo | ✅ |
Assumptions and limitations
- APR, not flat rate: All rates are Annual Percentage Rate (APR), the legally required way to quote interest in the UK under FCA rules. The APR includes the interest rate but may not include all fees.
- Fixed rate assumed: The calculator assumes a fixed interest rate for the entire term. Variable rate deals will have different total costs.
- Depreciation is average: The depreciation model uses industry averages. Individual cars vary significantly based on make, model, mileage, condition, and market conditions.
- PCP simplified: Real PCP deals include mileage limits (typically 8,000–12,000 miles/year), excess mileage charges, and condition requirements. The balloon payment is set by the lender, not freely chosen.
- Running costs excluded: The calculator focuses on finance costs only. Total cost of ownership also includes insurance, road tax, fuel, maintenance, MOT, and parking.
- Credit score impact: Quoted rates assume reasonable credit. Borrowers with poor credit history may face significantly higher APRs (15%+) or be declined.
Sources
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