The Basics
Payments on car loans are calculated using three components:
Principal
The total cost of a vehicle including any fees that the lender or dealership may have for the car loan and any options or add-ons you choose.
Term
The length of time that payments will be made for. Typically terms will run anywhere between 36 Months and 72 Months (Shorter or longer terms are sometimes possible).
Interest Rates
The percentage that the lender is charging for you to borrow money. Interest rates can vary depending on whether the vehicle and the risk the lender perceives in lending the loan.
When you get a car loan you are typically making payments back to a lender rather than to the dealership. That being said, some dealerships will offer in-house financing, which might allow a customer with bad credit to get an auto loan in instances where they otherwise would not have been able to. In this case the car loan is directly with the dealership or “in-house”.
