- Car loan
- Financing arranged with a lender, such as a credit union, bank, online lender, finance company, or dealership-connected lender.
- Interest rate
- The percentage rate charged for borrowing money before certain fees are included. It is useful, but APR is usually better for comparing offers.
- APR
- Annual Percentage Rate. This reflects the yearly cost of credit, including interest and certain loan costs. When shopping, compare APRs for the same term and amount financed.
- Loan term
- The number of months you agree to repay the loan. Auto loans are often offered in 12-month increments, commonly from 36 to 84 months.
- Principal
- The amount borrowed and owed before interest. Payments are typically applied to fees first, then interest, then principal, depending on the contract.
- Monthly payment
- The amount due each month. It matters for cash flow, but it should not be the only number you compare.
- Down payment
- Money paid up front to reduce the amount financed. A larger down payment can reduce monthly payment, total interest, and negative-equity risk.
- Amount financed
- The loan balance after the down payment, trade-in credit, taxes, fees, add-ons, and any rolled-in debt are counted.
- Out-the-door price
- The total price before financing: vehicle price plus taxes, title, registration, dealer fees, and required charges.
Key terms
The words that control the deal.
Know these before comparing offers. Small wording differences can change the cost of the car.