Car Loan Basics

"If you can dream it, then you can do it" - Enzo Ferrari, Founder of the Ferrari automobile brand.

What is included in a car loan payment? There are two basic parts to the total cost of car loan payments: principal and interest.

The principal is the negotiated cost of the vehicle itself.

The interest is the total amount of the costs accrued over the life of the loan based on the principal amount and the stated interest rate.

What is APR? An interest rate is a basic rate charged to the borrower for the money loaned. The interest rate is normally expressed as a percentage for a one-year period and known as the annual percentage rate (APR).

What is a down payment? The down payment is an upfront amount of cash paid by the borrower at the time of the purchase of the vehicle. It is usually expressed in terms of a percentage of the total price. It is not a legal requirement when taking out a car loan, but is almost always required by the lender.