If you’ve been considering buying a new car, then you might have looked at car finance as an option. Spreading the cost makes better cars more affordable. But, there can be confusion at just how much you can afford to finance. You may also want to try and work out how much a package you could afford before you apply. The good news is that there’s a tool available online to help you work out just how much a car finance product could cost, and how much you can afford to borrow – a car finance calculator.

How a car finance calculator works

In simple terms, a car finance calculator works by asking you a few different questions about how much you can afford, how long you want the agreement to last, and your credit rating. It will then give you a quick overview of how much you can afford to borrow and what that will cost you in terms of interest.

The tool allows you to see if car finance is a realistic option for you before you apply. If you know how much the car you want to finance costs, then you can adjust the inputs to work out how much you would need to spend each month to afford it. If you don’t know what car you want, then you can see what sort of amount you can borrow and look at cars in that price range.

What you need before you use the tool

To make the car finance calculator tool work as accurately as possible, there are two things you need. The first is an idea of your monthly budget. If you don’t know how much you can afford to pay each month on a finance package, then you won’t get an accurate reading of what you can borrow.

The second thing you need is an idea of your credit score. Knowing what credit rating you have will allow the tool to give you an idea of the interest you’ll be charged for the finance package.

Calculating your budget

Calculating your budget is relatively straightforward. All you need to do is take your monthly income – e.g. your pay from work, any pension or regular income you receive – and deduct your outgoing expenses – e.g. your rent, mortgage, utility bills.

Sit down and put all your coming and goings down on a piece of paper or in a spreadsheet. Be honest with yourself at how much you spend and save. You’ll then be able to see just how much you could potentially afford to pay for a finance package.

Check your credit score

To check your credit score, you can use one of the many free credit check agencies online, who will provide you with what your rating is based on your credit file. Make sure you read through their report carefully so you can spot any errors or see things that can be improved or fixed. You’ll then have a credit rating you can use to get the most accurate reading on the calculator.

One final thing to remember

The car finance calculator is just there to act as a guide. Other factors such as the size of your deposit can mean you have access to an even better finance package. You should use the tool to give you an idea of how much you can afford. When you’re ready, apply online through an FCA approved provider like Creditplus, and you’ll have a dedicated customer advisor working to find the best deal for you and your circumstances.