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What is an Auto Loan Amortization Schedule?

by Autobytel Staff
May 20, 2011

When it comes to getting a car loan for your new ride, there are many different issues you must consider like your budget, the down payment, monthly payment, the interest rate, as well as the A.P.R. (annual percentage rate). But if you want to know exactly how and when you are going to be paying off your vehicle, then you must know the facts about your auto loan amortization schedule.

What is Car Loan Amortization?

An auto loan amortization schedule may be about as hard to say as it is to spell but any easy-to-read finance document should be able to give you the pertinent information quickly and clearly. Oh, wait. There’s no such thing as a clearly written financial document for those of us born without the ability to read small print for long periods of time and the skills required for a PhD in mathematics.

The term amortization refers to the point in time when you are finished off paying your monthly payments and no longer owe the lender any more money. At this point your vehicle becomes amortized which sounds a bit like something that would require a wizard and the knights of King Arthur’s Round Table, but that is the term nonetheless.

But figuring out the exact amount that goes into your auto loan amortization schedule can be tricky to determine and can vary from lender to lender. In most cases, as your car gets older you begin to pay off less and less of the principal (the car’s actual value or cost) and begin to pay off more of the interest fees associated with the loan.

Calculating your car loan amortization schedule can really help any new or used car buyer see that extending the length of their car loan over a longer term is very often a false economy. Sure, you will see your monthly payments drop but very often if you turn a 5 year loan (always recommended) into a 7 year loan you will often times find that the savings doesn’t amount to much even with your monthly payments. That is because you will continue to pay so much more in interest rate finance charges over that period of time.

Figuring out your exact auto loan amortization schedule on your own is a very difficult task but there are car loan amortization schedule calculators available on the Internet which only require some basic interest rate and financial information that is easily found with the paperwork that came with your car. But if you already own the car, understanding your auto loan amortization schedule is kind of just an exercise in curiosity then, isn’t it?

Well, not really as it can really help you see your car loan in a monetarily specific manner, which can help you next time you buy a new car as you negotiate the terms and contract. There really is no better way to understand what you are paying for each month than by doing your homework and finding out your own personal car loan amortization schedule. 


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