A worked example
Sarah from Melbourne wants to buy a $35,000 Toyota RAV4. She has $5,000 saved for a deposit, so she needs to borrow $30,000. Her bank offers a 7.5% p.a. comparison rate on a five-year car loan with no balloon payment.
Using the calculator, Sarah enters $30,000 as the loan amount, 7.5% as the interest rate, and 60 months as the loan term. The calculator shows her monthly repayment will be $601. Over the five years, she'll pay $36,060 in total, which means $6,060 in interest.
Sarah then experiments with a balloon payment. She sets a $10,000 balloon (33% of the loan amount). Her monthly repayments drop to $468, saving her $133 per month. But at the end of five years, she owes $10,000 in one lump sum. If she refinances that balloon at the same rate for another two years, she'll pay an extra $1,200 in interest. The calculator helps her see that lower monthly payments come at a cost.
State-by-state differences
- NSW: Stamp duty on car loans doesn't exist, but if you're buying from a dealer, motor vehicle stamp duty applies to the purchase price (around $3 per $100 over $45,000 for new cars). Factor this into your deposit, not the loan amount.
- VIC: Motor vehicle duty is $8.40 per $200 for passenger vehicles under $68,740. This is payable upfront and separate from your loan, so budget accordingly.
- QLD: No stamp duty on passenger vehicles, which can save you several hundred dollars compared to southern states. This might let you reduce your deposit or borrow less.
- WA: Vehicle licence duty applies at $3.50 per $100 of vehicle value for cars under $25,000, then higher rates above. Like other states, this is paid before registration, not built into the loan.
- SA, TAS, ACT, NT: Each has its own vehicle duty schedule. SA charges $3 per $100 up to $1,000 value, then $4 per $100 above. Tasmania has a similar tiered system. The ACT abolished stamp duty on used cars in 2012 but still charges on new vehicles. NT has no stamp duty on vehicle transfers, making it the cheapest jurisdiction for buying a car.
Common mistakes people make
- Ignoring the comparison rate: People see a low advertised rate like 5.9% and assume that's what they'll pay, but the comparison rate (which includes fees) might be 7.8%. Always enter the comparison rate into the calculator to get an accurate repayment figure. A $30,000 loan over five years at 5.9% costs $572 per month, but at 7.8% it's $609, a $37 monthly difference.
- Overestimating what they can afford: Just because the bank approves a $40,000 loan doesn't mean you can comfortably repay it. Banks assess serviceability at your current income, but they don't know about your Afterpay debt or that your rent is about to increase. Use the calculator to see if the monthly payment fits your actual budget, not the bank's theoretical one.
- Treating a balloon payment as free money: A $10,000 balloon feels like a problem for future you, but you're still paying interest on that $10,000 for the entire loan term. If you can't pay the balloon at the end, you'll refinance it and pay interest again. Run the numbers both ways in the calculator before committing.
- Forgetting about running costs: The calculator shows loan repayments, but your car also needs registration ($300 to $900 yearly depending on state), insurance ($800 to $2,000 yearly), fuel, and servicing. A $600 monthly loan payment becomes $1,000+ in total monthly car costs.
What this calculator doesn't account for
This calculator shows the mathematics of your loan repayment, but it doesn't account for fees charged by lenders. Most car loans include an establishment fee ($200 to $600) and sometimes monthly account-keeping fees ($5 to $15). These can add hundreds or even thousands to your total cost over the loan term.
It also doesn't model early repayment scenarios. Many car loans allow extra repayments, which can cut years off your loan and save thousands in interest. Some lenders charge early exit fees if you pay out the loan completely before term, typically $200 to $800. The calculator assumes you make minimum repayments for the full term.
If you're salary sacrificing your car loan through a novated lease arrangement, the tax treatment is completely different and this calculator won't reflect your actual take-home pay impact. Novated leases involve pre-tax deductions and fringe benefits tax calculations that need specialised calculators.
Edge cases and nuances
Refinancing a balloon into a new loan: If you can't pay your balloon at the end of the term, most people refinance it. But your interest rate might be different from your original loan. In 2025-26, variable car loan rates have been volatile, so a balloon you agreed to in 2020 at 5% might refinance at 8%. The calculator can show you the new loan cost, but you need to run it twice, manually linking the balloon amount to a new loan calculation.
Trading in before the loan ends: If your loan balance is $18,000 but your car is only worth $15,000 (common after three years of a five-year loan), you're in negative equity. The dealer won't give you cash, they'll roll that $3,000 shortfall into your new loan. You'll be financing two cars at once. The calculator doesn't show this, you need to add the negative equity to your new loan amount manually.
Guaranteed future value products: Some manufacturers offer loans where the balloon is guaranteed, they promise to buy the car back for that amount. If the market value drops below the balloon, you're protected. But if it's worth more, you don't get the extra. These products have different risk profiles than a standard balloon, and the calculator treats them identically.
