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Car Loan Amortization
Definition
Gradual repayment of a car loan through fixed monthly payments over time.
Explanation
Each fixed payment covers interest and principal. Early payments are interest-heavy, later ones are principal-heavy. Understanding amortization shows the impact of extra payments.
An extra $50/month on a 60-month $30,000 loan at 6% can save over $800 in interest and shorten the term by 7 months.
Example
$30,000 car loan at 6% for 60 months: Month 1 payment = $150 interest + $430 principal. Month 60 = $3 interest + $577 principal.