Work out the amount financed before comparing rates

The repayment formula starts with the financed balance, not automatically with the windscreen price. Subtract genuine cash deposit and positive trade-in equity, then add any establishment fee that the lender rolls into the contract. If a trade-in is worth R12,000 but still has R8,000 owing, only the R4,000 equity reduces the new loan. Treating the full trade-in value as a deposit would understate the new debt by R8,000.

Drive-away price and ownership costs are different buckets

A drive-away price may already include stamp duty, registration and dealer delivery, while insurance, fuel, servicing, tyres and parking continue after purchase. This calculator models finance cash flows only. It does not say that a repayment is affordable simply because it fits under a target amount. Put the calculated payment into a household budget with running costs and a buffer for a variable rate or changed income.

Financing a fee makes the fee more expensive than its label

A R500 establishment fee added to a five-year balance is not just a R500 cost. It also attracts interest for as long as it remains outstanding. A monthly fee works differently in this model: it is added to each monthly cash payment but is not placed inside the interest-bearing principal. Check the contract because lenders can describe and collect fees differently. Late fees, default interest, broker charges and early termination amounts are not guessed here.

A balloon shifts repayment to the end; it does not erase the debt

A balloon payment, sometimes called a residual, leaves a nominated amount outstanding after the scheduled monthly instalments. The calculator discounts that future lump sum back through the loan formula, so the monthly repayment covers the balance that must amortise while allowing the balloon to remain. Because part of the principal stays outstanding for the full term, more interest is usually charged than on the same loan with no balloon.

Plan the exit before choosing the lower payment. At the end of the term you may pay the balloon from savings, sell or trade the car, or apply to refinance it. Sale proceeds are not guaranteed to equal the debt. Refinancing requires a new approval and can extend the period over which interest is paid.

The formula used for the monthly instalment

For a positive annual rate, the model uses the standard present-value relationship for an annuity with a future balloon. The monthly rate is the annual percentage divided by 12 and 100, while the number of payments is years multiplied by 12. The balloon is the selected percentage of the vehicle price. At a 0% rate, the calculation switches to a straight-line branch: financed balance minus balloon, divided by the number of payments. It does not divide by zero or invent interest.

Monthly instalment = [P − F ÷ (1 + r)ⁿ] × r ÷ [1 − (1 + r)⁻ⁿ], where P is the financed balance, F is the final balloon, r is the monthly interest rate and n is the number of monthly repayments. The displayed monthly cash figure then adds the monthly account fee.

Compare monthly relief with the interest and lump sum it creates

For a R45,000 car with a R5,000 deposit, a R500 financed establishment fee, a 7.5% annual rate, a five-year term, a R10 monthly fee and a 20% balloon, the financed balance is R40,500 and the balloon is R9,000. The calculated loan instalment is about R687.45, or R697.45 after the monthly fee. Without a balloon, the loan instalment is about R811.54, or R821.54 after the fee.

The balloon cuts the monthly cash requirement by about R124.09, but estimated interest rises from R8,192.22 to R9,746.72. Including the R5,000 deposit, monthly fees and every loan payment, cash outlay is about R55,846.72 with the balloon compared with R54,292.22 without it. The difference is the cost of keeping more principal outstanding. This comparison does not forecast resale value, so it also leaves the R9,000 refinancing or sale risk visible.

• Payment pressure: Would the no-balloon payment still fit after rego, insurance, fuel and maintenance?
• End-of-term plan: Is there a credible source for the lump sum that does not depend on optimistic resale value?
• Total cost: Does the lower instalment justify the extra interest and any refinance costs?

Changing the deposit can also change risk. A larger deposit reduces both repayments and interest, and can lower the chance that the loan balance exceeds the car’s market value early in the term. But using every dollar of savings as a deposit may remove the emergency buffer needed for repairs, insurance excess or lost income. The calculator gives the finance arithmetic; the budget decision still needs accessible cash reserves.

Read the comparison rate and contract conditions beside this estimate

South African lenders must disclose a comparison rate for consumer car finance. It combines the interest rate with most fees using a prescribed example, which helps compare products that advertise a low rate but charge more elsewhere. It is not a personalised all-in rate and may not reflect your loan amount, term, balloon, optional products or every conditional fee. Compare like with like, then enter the actual contract rate and fees offered to you.

Secured, unsecured, fixed and variable are real contract differences

A secured car loan gives the lender rights over the vehicle if repayments are not made. An unsecured personal loan does not use the car as security but may carry a higher rate. A fixed rate can make the scheduled repayment predictable, although an early repayment charge or restriction may apply. A variable rate can move during the term and may offer more flexibility. This calculator assumes one unchanged rate for every scheduled month, so run a higher-rate scenario when considering a variable contract.

Negative equity changes what happens when the car is sold

Cars can depreciate faster than their finance balance falls, particularly when the deposit is small, the term is long or a balloon is high. If the sale price is below the payout figure, selling the car does not clear the loan; the shortfall still has to be paid. Ask the lender for a payout quote rather than treating the calculator’s remaining balance as a settlement figure, because accrued interest and fees can affect the amount on a particular date.

Before accepting dealership finance, identify every party and product in the paperwork. Loan protection insurance, warranties, servicing plans and accessories can be added to the financed amount. A convenient monthly quote can hide those additions if the discussion stays focused on repayment rather than principal. Re-enter the final amount financed from the contract and compare it with the price of the vehicle. A difference should have a clear, chosen explanation.