Monthly instalments after the typical 20% down payment, in AED.
Monthly instalment
—
Loan amount
—
Total interest
—
VAT in price
—
Worked example
Take a car priced at AED 120,000 with the typical 20% down payment, financed at 3.5% over 5 years. The down payment is AED 24,000, so the bank finances 80 percent, which is AED 96,000. On a reducing-balance loan at 3.5% over 60 months, the monthly instalment is about AED 1,747. Over the full term you repay about AED 104,808, so total interest is roughly AED 8,808. The dealer price usually already includes 5% VAT, and extracting it from AED 120,000 gives about AED 5,714 of VAT inside the sticker price, which is worth keeping in mind when you compare quotes.
Step
Amount
How it is calculated
The loan is the car price less your down payment. UAE banks generally require at least a 20% down payment, so they finance up to 80 percent of the price. The monthly instalment uses standard reducing-balance amortisation, where each payment covers the interest accrued on the outstanding balance that month plus a slice of principal, so early payments are mostly interest and later ones mostly principal. Total interest is the sum of all instalments less the amount borrowed. Separately, the calculator extracts the 5% VAT that is normally already included in the advertised dealer price, dividing the price by 1.05 and taking the difference, so you can see the tax component. VAT is a one-off on the purchase, not an annual charge.
Frequently asked questions
How much down payment do I need for a car in the UAE?
UAE banks generally require a minimum 20% down payment on a car loan, so they finance up to 80% of the price. The instalment is calculated on the financed amount at a reducing balance rate over the term you choose. Remember the dealer price usually already includes 5% VAT, so factor that into the total cost of the vehicle when you compare offers.
What is the maximum car loan term in the UAE?
Most UAE banks cap car loans at 60 months (5 years), though some lenders offer up to 84 months (7 years) for certain vehicles. A longer term reduces the monthly instalment but increases the total interest paid over the life of the loan. The Central Bank of the UAE sets lending standards that banks must follow for personal and auto finance.
How is the monthly instalment on a UAE car loan calculated?
UAE car loans use a reducing-balance (amortisation) method. Each monthly payment covers the interest accrued on the outstanding principal that month plus a portion of principal repayment. Early payments are weighted toward interest; later payments are weighted toward principal. The flat-rate method is sometimes quoted by dealers, which looks lower but produces a higher effective rate, so always confirm which method your bank uses.
Does VAT apply to car purchases in the UAE?
Yes. The UAE Federal Tax Authority applies a standard 5% VAT to new and used vehicle sales. Most dealer prices are quoted inclusive of VAT, so the tax is already embedded in the sticker price. You do not pay VAT again on the loan itself, only on the vehicle purchase. When comparing prices across dealers, confirm whether the quoted figure is VAT-inclusive to avoid surprises at signing.