Car loan repayments are worked out from four things: how much you borrow, the interest rate, the loan term and how often you repay. Most car loans in Australia are amortising loans, which means each repayment covers that period's interest plus a slice of the amount borrowed, so the balance falls to zero by the end of the term. Once you understand that mechanism, it is much easier to compare quotes and see which changes actually lower your cost.
Short answer: your repayment is the fixed amount that, paid every period for the full term, clears both the loan and the interest charged on the falling balance. On a $30,000 loan at 9% p.a. over 5 years, that works out to about $622.75 a month, with about $7,365 paid in interest over the life of the loan (illustrative, before fees).
The four inputs that set your car loan repayments
- Loan amount (principal): the price of the car, less any deposit or trade-in, plus any fees or add-ons you choose to finance.
- Interest rate: the annual rate the lender charges, applied to the outstanding balance.
- Loan term: the number of years you repay over. Moneysmart notes car loans are usually repaid over a fixed term of between one and seven years.
- Repayment frequency: weekly, fortnightly or monthly.
A fifth input applies to some loans: a balloon payment, a lump sum left owing at the end. It lowers the regular repayment but, as Moneysmart points out, you repay that lump sum with interest, so the total cost is generally higher.
How car loan repayments are calculated, step by step
Lenders use the standard amortisation formula. In plain terms:
- Divide the annual rate by the number of repayments per year to get the rate per period. At 9% p.a. paid monthly, that is 0.75% a month.
- Work out the level payment that, after interest is added each period, brings the balance to zero at the end of the term.
- Each repayment is split. The interest part is the period rate times the balance still owing. The rest reduces the principal.
Using the $30,000, 9%, 5 year example:
- Month 1: interest is $30,000 x 0.75% = $225.00. Of the $622.75 repayment, $397.75 reduces the balance.
- After 12 months: the balance is about $25,025. Interest is now charged on that smaller amount, so more of each repayment goes to principal.
- Month 60: the final repayment clears the loan.
This is why the early years of a loan are interest heavy and the later years pay down the balance faster. Many lenders calculate interest daily on the balance and charge it monthly, so real figures can differ slightly from a monthly worked example. Your loan contract sets out exactly how your lender does it.
How the loan term changes your repayments
A longer term lowers the regular repayment but increases the total interest, because the balance stays higher for longer. On the same $30,000 at 9% p.a. (illustrative):
- 3 years: about $953.99 a month, about $4,344 in total interest
- 5 years: about $622.75 a month, about $7,365 in total interest
- 7 years: about $482.67 a month, about $10,544 in total interest
Stretching from 5 to 7 years saves about $140 a month but costs about $3,180 more in interest. Our guide to choosing a 3, 5 or 7 year car loan term looks at the trade-off in more depth.
How the interest rate changes your repayments
Small rate differences add up. On $30,000 over 5 years (illustrative):
- 7% p.a.: about $594.04 a month, about $5,642 in interest
- 9% p.a.: about $622.75 a month, about $7,365 in interest
- 11% p.a.: about $652.27 a month, about $9,136 in interest
- 13% p.a.: about $682.59 a month, about $10,956 in interest
Each 2 percentage points adds roughly $1,700 to $1,850 in interest on this loan. That is why it pays to compare current car loan rates across several lenders before you sign. When you compare, ask for the comparison rate. Moneysmart says lenders must give you the comparison rate, which combines the interest rate and fees into one figure; compare loans with the same amount and term.
How fees and balloon payments change the numbers
Fees financed into the loan are charged interest just like the car. If a $500 fee is added to the $30,000 loan above, the repayment rises to about $633.13 a month and total interest to about $7,488 (illustrative). Our guide to car loan fees covers the common ones.
A balloon works the other way on the repayment but not the cost. With a 30% balloon ($9,000) on the same loan, the monthly repayment drops to about $503.43, but total interest rises to about $9,206 because a large part of the balance is never paid down during the term. You also still need to pay or refinance the $9,000 at the end. See balloon payments explained.
Weekly, fortnightly or monthly repayments
Paying more often means the balance falls slightly sooner, so a little less interest accrues. On $30,000 at 9% over 5 years (illustrative): weekly repayments of about $143.38 cost about $7,280 in interest, fortnightly repayments of about $286.97 cost about $7,306, and monthly repayments of $622.75 cost about $7,365. The saving is real but small. Choosing a frequency that matches your pay cycle usually matters more for budgeting.
How extra repayments cut the cost
Extra repayments go straight to principal, so every later interest charge is calculated on a lower balance. Adding $100 a month to the $622.75 repayment in the example clears the loan in about 50 months instead of 60 and saves about $1,289 in interest (illustrative). Check your contract first: Moneysmart notes variable rate car loans usually do not have an early exit fee. Fixed rate loans can differ, so check what your contract says about extra repayments and early payout. Our guide to paying out a car loan early explains what to look for.
Check the numbers before you apply
You do not need to do the maths by hand. Our loan calculators apply the same formula and let you change the amount, rate, term and frequency to see the effect instantly. A few habits help:
- Compare the total cost of the loan, not just the repayment.
- Use the comparison rate to compare offers with the same amount and term.
- Test a higher rate to see how much buffer your budget has.
- If you already have a loan, run your current numbers and see whether refinancing your car loan could lower your rate or term.
All worked examples in this guide are illustrative only. They assume a fixed rate with interest calculated monthly and exclude fees unless stated, so they will not match any particular lender's quote. Moneysmart's car loans guidance was checked on 6 October 2026.
