1. What is a Car Loan Amortization?

Car loan amortization is the process of paying off a car loan with regular payments over time. Each payment covers both interest and principal, with the interest portion decreasing and principal portion increasing over the life of the loan.

2. How Does the Calculator Work?

The calculator uses these amortization formulas:

Where:

• \( Interest_k \) — Interest portion of payment k
• \( Principal_k \) — Principal portion of payment k
• \( Balance_k \) — Remaining balance after payment k
• \( r \) — Monthly interest rate (annual rate ÷ 12)
• \( PMT \) — Fixed monthly payment amount

3. Understanding the Amortization Schedule

Details: The amortization schedule shows how each payment is split between interest and principal, and how the loan balance decreases over time. Early payments are mostly interest, while later payments are mostly principal.

4. Using the Calculator

Tips: Enter the total loan amount, annual interest rate, and loan term in years. The calculator will show your monthly payment and complete amortization schedule.

5. Frequently Asked Questions (FAQ)

Q1: Why does most of my early payment go to interest?
A: This is how amortization works - since interest is calculated on the current balance, and the balance is highest at the beginning, most of your early payments cover interest.

Q2: How can I pay less interest overall?
A: You can make extra principal payments, choose a shorter loan term, or negotiate a lower interest rate.

Q3: What happens if I make a larger payment?
A: Any amount over your regular payment goes directly toward principal, reducing your total interest and shortening the loan term.

Q4: Why is my monthly payment higher than I expected?
A: Higher interest rates and longer loan terms increase total interest paid, but shorter terms increase monthly payments.

Q5: Does this include taxes and insurance?
A: No, this calculator only shows principal and interest. Your actual payment may include taxes, insurance, and other fees.