How the payment is built
Auto loans are amortising: each payment covers the interest accrued since the last one, and the remainder reduces principal. Early payments are interest-heavy; later ones are mostly principal.
M = P × [r(1+r)ⁿ] ÷ [(1+r)ⁿ − 1]
r = monthly rate, n = number of payments
Term length is a trap
Extending the term lowers the monthly payment and raises total interest. Dealers often quote payments rather than prices, which makes a longer term look like a better deal.
On a $30,000 loan, moving from 48 to 84 months cuts the monthly figure substantially while adding thousands in interest — and leaves you owing money on a far older car.
Negative equity
Cars depreciate faster than long loans amortise, particularly in the first couple of years. On a 72 or 84-month term it is common to owe more than the car is worth for a large part of the loan.
That matters if the car is written off — insurance pays market value, not your balance — and it matters if you want to trade in, since the shortfall typically gets rolled into the next loan, compounding the problem.
APR versus interest rate
APR includes certain fees as well as interest, so it is the figure to compare between offers. A lower nominal rate with higher fees can cost more than a higher rate without them.
Get financing quotes before the dealership
An approval from a bank or credit union gives you a benchmark and turns the conversation into a price negotiation rather than a payment negotiation. Dealer financing is sometimes genuinely competitive — but you can only know that if you have something to compare it against.