Auto Loan Amortization1

Auto loan amortization


Auto loan amortization is the schedule of gradual payment of the auto loan. The auto loan amortization schedule shows the amount that is applied to the interest and the principal on each payment. Auto loan amortization schedule also shows the remaining balance of the auto loan after the payment is made.

Auto loan amortization can be calculated using the online auto loan calculator in order to arrive at the amount of monthly payment you need to pay for the auto loan. In order to make the auto loan amortization schedule you are required to get the purchase price or selling price of the car before tax. Then deduct the trade in amount to the gross selling price of the vehicle. The net price is multiplied to the sales tax rate in order to get the sales tax. Then add sales tax and fees to the gross purchase price to get the total price of the car. Then deduct the amount you paid as down payment. Also deduct the net trade-in amount. Net trade-in refers to the trade-in value less the balance owed on the car being traded in. After deducting down payment and net trade-in amount you will arrive at the Loan Amount. The loan amount in the auto loan amortization is the value needed to arrive at the interest rate per annum. You need to multiply the interest rate with the number of years the loan is applicable to get the total interest payable. Then spread this interest to the total loan term to get the monthly payments needed.

Loan Summary:

Sales/purchase price $ 20,000
Interest rate 9%
Terms in months 48
Fees 40
Sales tax rate 7%
Cash down payment $1,500
Trade allowance $ 5,000
Amount owed on trade $ 4,000

Schedule 1: Sales tax amount

Purchase price $ 20,000
Trade-In value 5,000
Net Purchases $ 15,000
Multiply with sales tax rate 7%
Sales tax amount $ 1,050

Total Purchase Price:

Purchase price $ 20,000
Sales tax amount (Sched. 1) 1,050
Fees 40
Total Price $ 21,090


Loan Amount:

Total Purchase price $ 21,090
Less: Down payment 1,500
Net trade in (Sched. 2) 1,000
Loan amount $ 18,590



Sched. 2: Net Trade In

Trade allowance $ 5,000
Less: Amount owed on trade 4,000
Net trade in value $ 1,000



From the auto loan amortization schedule you can see the payment, principal, interest and loan balance. Total monthly payment is comprised of payments for the principal and interest. As monthly payments are applied to the auto loan amortization, the schedule will show an increasing amount being applied to principal while there is a decreasing amount applied to the interest. Amount applied to the principal is arrived at by deducting interest to the total payments. Loan balance reflected in the auto loan amortization is deducted with the amount being applied to the principal in order to get the succeeding month's loan balance.

A typical example of auto loan amortization schedule looks like this:

Payment Principal Interest Loan Balance
$ 18,590
$ 463 $ 323 $ 139 18,267
$ 463 $ 326 $ 137 17,941
$ 463 $ 328 $ 135 17,613

The auto loan amortization schedule will continue until the auto loan is fully paid and the loan balance is equal to zero.