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Auto Loan Amortization: The Process of Paying Off Debt

When you make your monthly auto loan payments, your entire payment amount doesn’t go toward the principal balance.  Since you pay interest on your loan, part of your payment will pay down your interest.

Using an auto loan amortization calculator, also known as an auto loan calculator, will provide you with your amortization schedule. This schedule tells you how much of your monthly payment counts toward your principal balance vs. interest so you can better understand your monthly auto loan payments. Below we’ll talk more about what this actually means.

What is Auto Loan Amortization?

Amortization is the process of paying off debt, including both regular principal payments and interest payments over a period of time.

When you secure auto financing, each payment is part of a car loan amortization schedule, which is the plan for debt payoff.

At the beginning of your loan, you will pay more in interest, and over time, more of your monthly payment will go toward the principal balance. As more money goes toward your principal balance, your loan balance reduces quicker.

Learn How Car Loan Amortization Schedules Work

Seeing an amortization schedule clearly outlines how your monthly payments are split. With this clarity, you can decide whether you’re okay with the current payments or choose to pay extra toward the principal balance to offset the portion of your monthly payment going to interest.

Here is an example of an amortization schedule for an auto loan.

Vehicle Price: $30,000
Payment Period: 60 months
Down payment: $0
Interest Rate: 4%

Month Interest Principal Balance
Month 1 $100 $452 $29,548
Month 2 $98 $454 $29,094
Month 3 $97 $454 $28,638
Month 4 $95 $457 $28,181
Month 4 $95 $459 $27,722


Auto Loan Amortization Calculators

There are a variety of auto loan amortization calculators online and you will need to input the basic information to get a result:

Vehicle Price: How much does your vehicle cost?

  • Down Payment: How much of a down payment are you making on your vehicle?
  • Payment Period: How many months will you make payments on your car?
  • Interest Rate: What is the estimated interest rate for your auto loan?

Depending on which calculator you use online your results could vary by a few pennies; however, these tools can give you an excellent estimate of what to expect with your loan.

Visit the Best Reward Financial Calculator Page to learn more about loan payment schedules, budgeting calculators, savings calculators and much more. 

*APR = Annual Percentage Rate. Rates and terms are subject to change without notice. The fixed rate and term of loan will be determined by the credit qualifications and loan-to-value (LTV). Other rate discounts may apply. Terms from 24 months to 72 months available. High value Vehicles, Boats, and RVs may qualify for a longer term. Other conditions and restrictions may apply.