How loan repayments are worked out
Repayment = (amount − balloon ÷ (1 + r)^n) × r ÷ (1 − (1 + r)^−n)
A balloon (or residual) lowers each repayment, but you still owe it as one lump sum at the end, and you pay interest on it for the whole term.
Worked example
A $30,000 car loan at 7.5% over 5 years costs $601.14 a month. Over 60 repayments you pay $36,068.31, so the loan costs $6,068.31 in interest.
Tips
- Compare the APR in the cost of borrowing disclosure, not just the advertised rate: it includes most fees.
- Secured car loans (the car is the security) usually have lower rates than unsecured personal loans.
- A shorter term means higher repayments but much less interest overall.
Borrowing for a home? Use the mortgage calculator.
Frequently asked questions
What are the repayments on a $30,000 car loan?
At 7.5% over 5 years, about $601 a month, with about $6,068 of interest in total.
What is a balloon payment?
A lump sum due at the end of a car loan. It cuts the regular repayments but increases the total interest.
Is GST or HST charged on car loan interest?
No. Sales tax is charged on the price of the car (and usually financed with it), not on the interest.
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Last updated October 2026.