Understanding Car Loan Amortization Schedule and Calculator

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Meghan Carbary has been writing professionally for nearly 20 years. A published journalist in three states, Meghan honed her skills as a feature writer and sports editor. She has now expanded her skill-set into the automotive industry as a content writer for Auto Credit Express, where she contributes to several automotive and auto finance blogs.

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, Automotive Content Editor - May 3, 2024

When you take out a car loan it's important that you know how your payment schedule will pan out over the life of your loan. In order to see your payment breakdown, including how much of your monthly payment is going toward principal and interest, you need to look at an amortization table.

Amortization is the process of reducing a loan balance slowly over time, and to see how your loan will pan out over time you can typically find this information online. Here's what we know about auto loan amortization, and how you can use online tools to manage your auto loan.

What is a Car Loan Amortization Schedule?

A car loan amortization schedule shows you the life of your loan in full detail including payment amounts that go toward both loan principal and interest. It shows your full payment schedule from the first payment to the last, how much of each payment goes toward your loan, and how much goes toward your interest.

Auto loan amortization is the process of reducing your balance by a periodic amount. Because loan payments normally include a portion of interest paid to the lending institution, calculating a monthly payment is not as simple as dividing the purchase price by the number of months in the loan term. Interest must be accounted for, and this is what leads us to the car loan amortization formula.

These calendars are schedules, designed to compute a complete series of payments. They include the payment amount in each payment term, as well as the interest incurred.

Most lenders use one of these three different types of amortization tables to figure out your loan repayment schedule. There are so many variables contained in the calculations, that a table is the easiest and quickest way to do this.

Here are some car amortization tables available on the Internet:

  • The Spitzer amortization table provides for a monthly fixed rate but with fluctuations of the interest amounts throughout the loan.
  • The Bolt amortization table provides for interest payments to be made only at the beginning of the loan. The principle is added after a set period of time.
  • The Equal Capitol table calculates the loan with a fixed monthly payment schedule. With this table, your payments get smaller as you reach the end of your loan term.

You probably won't find these names associated with the car amortization calculators you can find online these days since amortization is so universal now. Most auto loans in this day and age are simple interest loans. When they are paid, more of the monthly payment is applied to the interest and less to your principal. As the balance is paid down, less and less goes toward interest, since it's calculated daily based on the balance of your loan.

How Does Car Loan Amortization Work?

Amortization is the act of paying for something in installments. When you use an amortization calculator, it produces a schedule that can tell you how much of your monthly payment is going toward your principal balance, and how much is going toward your interest.

Car Loan Amortization Formula

To derive the correct answer, you must know the total price for the car, minus any down payment amount that was applied. You must also know the interest rate and the loan term. Input this information into most online auto loan amortization calculators, to derive a final monthly payment amount. The calculator uses figures such as the monthly interest rate and the total number of payments in the loan term to add interest to the principal for the final figure.

How to Use a Car Loan Amortization Schedule?

Learning to use an amortization schedule is typically pretty easy, just make sure you have all the proper information at your disposal.

Downloading your Schedule

Several schedules are available for different types of spreadsheet type programs, where the amortization calculator is a ready-made template. Simply save the template into your templates folder and load it to start calculating. One such example can be found here. The template is a simple Excel spreadsheet that is easy to use and is updated with add-on support available on the website.

Online Amortization Calculators

However, you don't even have to go as far as downloading a program if you simply need to view an amortization schedule. There are several amortization calculators available online that can generate your schedule, but you have to have all your information in order to use them.

The information you typically need to have includes the vehicle's MSRP, your interest rate, the amount you made as a down payment, and the date your loan began.

Amortization Schedules

After figuring out the monthly payment using the amortization formula, the car loan amortization schedule is fairly easy to derive. Using the interest rate per payment period (i.e. your yearly interest rate divided by 12 months), multiply this rate by the previous month's balance owed. The principal paid is calculated by subtracting the interest paid from the monthly payment amount. As the loan progresses, you'll notice that the amount of interest paid decreases, while the amount of principal balance paid increases. The last payment on the loan will usually differ slightly, as it needs to be adjusted to account for rounding during the calculation of payments.

More finance companies are trying to acquire clients on the basis of cost. This strategy means that free car amortization schedules are available on their websites. The schedules are based on fixed-rate car loans, with options to pay in a weekly, bi-weekly, monthly, bi-monthly, quarterly, semi-annual, or yearly term. Input the loan amount, and the program computes the installment payments according to the available payment terms in the program.

There are many benefits to looking at an amortization chart. You will be able to see when you can have your car loan paid, and how much principle comes off the amount each month. You will also be able to see what the benefits are if you pay more than your scheduled amount, and how much faster it can allow you to pay off your loan. Looking at the car loan amortization chart, you will be able to determine how many payments you should make ahead to be able to pay less interest on the loan.

Amortization Calculators

An amortization calculator shows the car loan amortization formula used to calculate the details of your loan and can be helpful when you are shopping for cars. There are factors that go into the formula, like your credit score, that will be helpful for knowing how much of a loan you are able to afford. By seeing the data represented in a chart, it is easy to see how the loan is set up and how much you will really end up paying for it.

Car loan amortization charts can also be helpful in determining what you want your monthly payment to be. You may be thinking you want a longer length of loan, to make your monthly payments smaller. But after looking at the chart, you may realize this is going to cost you a lot more money over the course of your loan. Using the car loan amortization chart as a way to gauge how much you will actually be paying for the loan, you can see the benefits of either getting a shorter-term loan with higher monthly payments or making extra payments to shorten the length of your loan. Your decision could differ depending on how much you can afford to pay each month and your financial goals in the future.

Understanding the car loan amortization formula can help you make a better decision about your car loan and the type of loan you want to take out. You can run different amortization charts with different figures, to see what the differences are when you change the principal loan amount, number of payments, and the different interest rates you can get.

Using an Online Amortization Calculator

When you sit down to use an amortization calculator, input all the necessary information, including the total amount financed, interest rate, and term. A website like Bankrate can provide you with average interest rates that are updated on a daily basis.

Once the result is calculated, an amortization calculator will show you in a table how principal and interest are amortized on a monthly basis. You will find that a simple interest loan is "front-loaded" with interest, meaning that early in the loan a greater proportion of the total monthly payment goes toward interest.

As the months and years of your loan move forward, less interest and more principal are paid each month. Using an amortization calculator, you can manipulate different rates, terms, and selling prices, to show you how even minute changes can impact your monthly payment or the total amount of interest that you pay.


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, Automotive Content Editor

Meghan Carbary has been writing professionally for nearly 20 years. A published journalist in three states, Meghan honed her skills as a feature writer and sports editor. She has now expanded her skill-set into the automotive industry as a content writer for Auto Credit Express, where she contributes to several automotive and auto finance blogs.

Follow On: LinkedIn

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