What’s the ‘Total amount payable’?

Car finance is just awesome, isn’t it? And yes, we may be ever so slightly biassed in saying that, but seriously - it’s a flexible, affordable way to take to the road in the car of your dreams. One tiny downside, though - is the slightly confusing terminology that comes with car finance. 

If it was up to us, the world of finance would stick to simple language, so that everyone would know what was what. But, we don’t make the rules, so we’re stuck with the confusing language for now. One thing we can do, though, is explain what it all means.

If you’re shopping around for a car finance deal, you might have come across the term ‘total amount payable’. Wondering what it is? Fear not - we’ve got you.

What does ‘total amount payable’ mean?

In a nutshell, the ‘total amount payable’ is the full amount you commit to pay back to the lender during the whole term of your car finance agreement. 

It includes the original amount you borrow, and your deposit, plus all the interest charged during the term, as well as any fees or charges.

It doesn’t include any discounts you might get, like a deposit contribution.

How is the ‘total amount payable’ typically calculated?

The total amount payable is made up of a few different elements, which all come together to make up the final figure.

Loan amount

Sometimes called the ‘principal amount’, this is the amount you borrow to pay for the car.

Deposit

The money you pay upfront at the beginning of your car finance agreement. This amount is taken off the overall price of the car, so it affects the size of your loan. The bigger the deposit, the smaller the loan.

Interest rate

The interest rate, or APR, is the amount you get charged for taking out the loan, and it’s usually calculated on the remaining balance each month.

Loan term

The period of time your car finance agreement lasts for. Depending on the type of car finance you go for, this can be anything up to 60 months, or five years.

Fees and charges

If your car finance comes with any extra fees, like arrangement fees, administration charges, late payment fees, or optional add-ons like a service plan, then these will be included in the total amount payable.

Final payment

With Personal Contract Purchase (PCP) you have the option to pay a final payment at the end of the term, known as a ‘balloon payment’, to pay off the balance and become the legal owner of the car. For Hire Purchase (HP), there’s a small ‘option to purchase’ fee at the end of the term, for the same reason. These fees will also be factored into the total amount payable.

What factors can affect the ‘total amount payable’?

The deposit you pay at the start of your agreement is included in the total amount payable, and it also has a broader impact on the total figure. The deposit gets taken off the overall price of the car, and then you effectively take out a loan to pay the rest of the cost of the car (with interest). Because the total amount payable includes interest on the amount you borrow, a bigger deposit will mean a smaller loan, so you’ll pay less interest. Your total amount payable will reflect this.

Your credit score also has a part to play, as this will dictate the interest rate you get offered by the lender. If your credit score is looking healthy, you’ll likely get a lower interest rate. This means you’ll have to pay less interest over the term of your car finance agreement, which in turn will bring the total amount payable down. On the other hand, if your score is lower than you’d like, you may be offered a car finance deal with a slightly higher interest rate, which would mean having to pay more interest over the duration of the agreement. And that adds up to a higher total amount payable.

What isn’t included in this figure?

If you’re getting a discount on your finance, the lender won’t include this in the total amount payable. 

For instance, you may be offered a ‘deposit contribution’, where the car dealer or manufacturer tops up your deposit, making your loan amount a bit lower. In this scenario, the deposit contribution itself won’t be included in the total amount payable, but you may see the impact of borrowing a lower amount since there will be less interest charged.

Why is it important to understand this figure?

When you’re in the market for a car finance deal, it’s a good idea to shop around to find the deal that gives you the best value, and this means you need to know how much a deal is actually going to cost you. It can be hard to gauge how good a deal is just by looking at interest rates or monthly repayments, but the total amount payable will give you a good way to compare.

Because the total amount payable is the full amount you commit to paying when you sign on the dotted line, it’ll give you a better idea of what you’re agreeing to.