An auto loan is a secured loan used to purchase a vehicle. The car serves as collateral, which is why interest rates are generally lower than unsecured personal loans. You make fixed monthly payments until the loan is fully repaid.
The four main factors are vehicle price, down payment, interest rate, and loan term. A higher down payment and lower interest rate reduce your total cost significantly.
New car loans typically have lower interest rates than used car loans. However, new cars depreciate faster. A used car at a slightly higher rate may still be the more economical choice overall.
Trading in your current vehicle reduces the amount you need to finance. Combined with a cash down payment, this can significantly reduce monthly obligations and total interest paid.