Amortization is the process of paying off a debt (like an auto loan) over time through regular installments. A portion of each payment goes toward the principal (the amount you borrowed) and the remainder goes toward interest (the cost of borrowing).
In the early stages of your car loan, a larger percentage of your monthly payment is applied to interest. As the loan balance decreases, the amount of interest charged each month also drops, meaning a larger portion of your payment begins to hit the principal balance.
Why You Should Use an Auto Amortization Schedule
Understanding your car loan's amortization is crucial for financial planning. It helps you see exactly how much your vehicle will cost over the life of the loan. If you see that you are paying $5,000 in interest over 72 months, you might decide to choose a 48-month term to save money, even if the monthly payment is higher.
Example Scenarios
Vehicle Price
Term
Rate
Monthly Payment
Total Interest
$25,000
36 Months
4.0%
$738.10
$1,571.60
$25,000
60 Months
4.0%
$460.41
$2,624.60
$40,000
72 Months
6.0%
$662.83
$7,723.76
Tips to Reduce Your Total Car Loan Cost
Increase your Down Payment: Borrowing less reduces the principal that generates interest.
Shorten the Loan Term: While monthly payments are higher, you pay significantly less interest over time.
Improve your Credit Score: A higher credit score qualifies you for lower interest rates, which drastically lowers the total cost.
Make Extra Payments: Most car loans allow for principal-only payments. Even an extra $50 a month can shave months off your loan and save hundreds in interest.
function calculateCarAmortization() {
var price = parseFloat(document.getElementById('carPrice').value) || 0;
var down = parseFloat(document.getElementById('downPayment').value) || 0;
var trade = parseFloat(document.getElementById('tradeIn').value) || 0;
var rate = parseFloat(document.getElementById('interestRate').value) || 0;
var term = parseFloat(document.getElementById('loanTerm').value) || 0;
var tax = parseFloat(document.getElementById('salesTax').value) || 0;
if (price <= 0 || term <= 0) {
alert("Please enter a valid price and loan term.");
return;
}
// Calculation Logic
// Apply sales tax to the price after trade-in (standard in many regions)
var taxableAmount = price – trade;
var taxValue = taxableAmount * (tax / 100);
var loanAmount = price – down – trade + taxValue;
if (loanAmount <= 0) {
document.getElementById('resLoanAmount').innerText = "$0.00";
document.getElementById('resMonthlyPayment').innerText = "$0.00";
document.getElementById('resTotalInterest').innerText = "$0.00";
document.getElementById('resTotalCost').innerText = "$0.00";
document.getElementById('results').style.display = 'block';
return;
}
var monthlyRate = (rate / 100) / 12;
var monthlyPayment = 0;
if (rate === 0) {
monthlyPayment = loanAmount / term;
} else {
// Amortization Formula: M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1]
var x = Math.pow(1 + monthlyRate, term);
monthlyPayment = (loanAmount * x * monthlyRate) / (x – 1);
}
var totalCost = monthlyPayment * term;
var totalInterest = totalCost – loanAmount;
// Formatting
var formatter = new Intl.NumberFormat('en-US', {
style: 'currency',
currency: 'USD',
});
document.getElementById('resLoanAmount').innerText = formatter.format(loanAmount);
document.getElementById('resMonthlyPayment').innerText = formatter.format(monthlyPayment);
document.getElementById('resTotalInterest').innerText = formatter.format(totalInterest);
document.getElementById('resTotalCost').innerText = formatter.format(totalCost);
document.getElementById('results').style.display = 'block';
}