When you secure an auto loan, you have two options. You can make your minimum payments on time each month until your loan is paid off, or you can make additional payments to pay down your principal quicker. 

There are pros and cons to each option. However you choose to manage your loan, an auto loan amortization calculator is a useful tool to help you get the details of your payoff.

What Is An Auto Loan Amortization? 

Amortization is the process of paying off your loan over time. Therefore, each payment you make demonstrates amortization. Part of your payment goes toward the interest and fees, while the remainder is applied to the principal balance. 

At the beginning of your loan, you will pay more in interest, and as you pay down your interest, more of your payment will start going toward your principal. As your principal balance reduces, you can pay off your loan faster. 

Auto Loan Amortization Calculator

An auto loan amortization calculator, commonly known as an auto loan calculator, outlines your amortization schedule. Your amortization schedule tells you how much of your payment is going toward interest/fees and your principal balance. 

Seeing this information outlined can be beneficial, as it clarifies exactly what your monthly payment goes toward. Sometimes seeing these numbers outlined clearly can motivate you to pay more towards your principal balance so you can pay off your car quicker. 

Information and interactive calculators are made available to you as self-help tools for your independent use and are not intended to provide investment advice. We cannot and do not guarantee their applicability or accuracy in regards to your individual circumstances. All examples are hypothetical and are for illustrative purposes. We encourage you to seek personalized advice from qualified professionals regarding all personal finance issues.

Here's an example of an annual amortization schedule. 

Car Price: $20,000

Interest Rate: 4.5%

Loan Term: 60 months

Down Payment: $2,000

Sales Tax: 6%

Titles, Registration, & Fees: $300

Year

Beginning Balance

Interest Paid

Principal Paid

Ending Balance

1

$18,000.00

$742.82

$3,284.02

$14,715.92

2

$14,715.92

$591.95

$3,434.89

$11,280.98

3

$11,280.98

$434.14

$3,592.70

$7,688.23

4

$7,688.23

$269.10

$3,757.74

$3,930.42

5

$3,930.43

$96.47

$3,930.37

$0.00

As mentioned previously, at the beginning of your loan, you will pay more in interest. As your remaining interest decreases, you will start paying more in principal with each payment. 

This is an annual schedule, so it is not as detailed as you would find with a monthly amortization schedule which breaks down each payment. 

Here's an example of a five-month amortization schedule using the same information from the previous example.

 

Month

Beginning Balance

Interest Paid

Principal Paid

Ending Balance

1

$18,000.00

$67.50

$268.07

$17,731.93

2

$17,731.93

$66.49

$269.08

$17,462.85

3

$17,462.85

$65.49

$270.08

$17,192.76

4

$17,192.76

$64.47

$271.10

$16,921.66

5

$16,921.66

$63.46

$272.11

$16,649.54

 

Using an auto loan amortization calculator can also serve as a motivation for you to continue making your car payments. When you know your milestones each month with how much you'll have left to pay, it can help keep you focused.

Alternatively, it can let you know when you are ready to trade-in/sell your car or if you want to get a new vehicle after paying off a portion of your principal. 

Taking Advantage Of An Auto Loan Amortization Calculator 

For whatever reason you choose to research your car's auto loan amortization schedule, be sure to put the information to good use. 

At Arbor Financial Credit Union, we want you to reach your auto loan goals, and the information you get from our auto loan amortization calculator can help you do just that.  

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