How Car Loans Really Work
How car loans really work in the US—principal, interest, term, and total cost so you don't overpay.
Car loans in the U.S. work like this: you borrow a principal (price minus down payment), pay interest at an APR over a term (e.g., 36–72 months), and your monthly payment is principal + interest. Here's how car loans really work.
TL;DR Car loan = principal (amount borrowed) + interest (APR × term). Monthly payment = principal + interest spread over term. Longer term = lower payment, more interest. Use autopremo.com payment calculator to see payment and total interest. Use autopremo.com.Principal and Interest
Principal = amount you borrow (OTD minus down payment). Interest = APR × principal over time. Each payment pays some principal and some interest; early payments are mostly interest. Use autopremo.com payment calculator to see payment and total interest. Get your numbers at autopremo.com.
Term and Payment
Longer term (e.g., 72 months) = lower monthly payment but more total interest. Shorter term (e.g., 36 months) = higher payment, less interest. Use autopremo.com payment calculator to compare terms. See payment at autopremo.com.
Agree on OTD First
Don't let the dealer set payment first—agree on out-the-door price first, then shop rate and choose term. Use autopremo.com OTD calculator and payment calculator. Check at autopremo.com.
Bottom Line
Car loans = principal + interest over term. Use autopremo.com payment calculator so you see payment and total interest and don't overpay.