What Car? Q&A - How do I work out how much a loan costs?

Q: Two dealers have tried to offer me loans at a flat rate. Although there are many websites that will allow a calculation of payments at various APRs, I can find nothing to allow me to calculate at flat rate.

Without this information, I feel vulnerable to exploitation when discussing finance with salespersons.

Can you explain how to assess the repayment of a £10,000 loan for a car over four years at a 4% flat rate?
Jan Benfield

It's misleading to try and compare the cost of loans with flat-rate percentage rates, so don't bother.

They don't give a true picture of the cost of a loan and are often far lower than the annualised percentage rate (or APR).

The dealers you're talking to have to disclose the APR figure so you can fairly and easily check the cost of different loans.

To save yourself doing any maths, the dealers also have to tell you what the exact monthly payment will be.

That way, you'll be able to fully understand the implications of any finance you consider.