Calculate your monthly car loan repayments — with or without a balloon payment.
How Car Loan Repayments Work
Car loans use the standard amortisation formula to calculate a fixed monthly repayment. Each payment covers the month's interest on the remaining balance, with the rest reducing the principal.
What is a Balloon Payment?
A balloon payment is a lump sum deferred to the end of the loan. By not paying down all the principal monthly, your repayments are lower. At maturity you must settle the balloon — by paying cash, refinancing, or trading in the car. Balloons are popular for business vehicle finance (novated leases, chattel mortgages) but increase total interest paid.
How the Balloon Calculation Works
When a balloon is present, we subtract its present value from the loan amount to find the "effective principal" being amortised monthly. The present value of the balloon is: PV = Balloon / (1 + monthly rate)^n. The monthly PMT is then calculated on the effective principal only.
Novated Leases vs Car Loans
A novated lease is arranged through your employer and lets you pay for a car using pre-tax salary, potentially saving GST and reducing your taxable income. For employees in higher tax brackets, a novated lease can be significantly cheaper than a standard car loan. Use our calculator to compare the net cost.
Frequently Asked Questions
What is a balloon payment on a car loan?
A balloon payment is a lump sum due at the end of a car loan term. By deferring part of the principal to the end, your monthly repayments are lower. At the end of the term you must pay the balloon — either from savings, by refinancing, or by selling the car.
What is a typical car loan interest rate in Australia?
Car loan rates in Australia typically range from 6–12% p.a. for secured loans. The rate depends on the lender, your credit score, the age of the vehicle, and whether the loan is through a dealer or bank. Dealer finance often appears attractive but may include hidden fees — always check the comparison rate.
Should I get a car loan or pay cash?
If the car loan rate is lower than what your savings are earning, a loan can make sense. However, cars depreciate — paying cash avoids interest entirely and you own the asset outright. Avoid financing a depreciating asset if you can comfortably pay cash.
How does a balloon payment affect my repayments?
A balloon payment reduces your monthly repayments by deferring part of the principal to the end of the loan. For example, a $30,000 loan at 8.5% over 5 years with no balloon costs about $616/month. A $5,000 balloon reduces that to about $520/month — but you owe $5,000 at the end.
Can I pay off a car loan early?
Many lenders allow early repayment, but some charge early exit fees especially on fixed-rate products. Check the loan contract before signing. Paying extra regularly can save significant interest over the life of the loan.