Auto loans are loans taken out by customers to purchase a vehicle. A customer may also take out an auto loan to refinance an existing loan secured by their vehicle. Since a car, truck, or SUV can have such a high price point, you may not have enough cash on hand to purchase the vehicle in full. Instead, you can take out an auto loan on your new or used car, drive it home from the dealer, and then pay off your vehicle over a set period of time using monthly payments.
A loan’s term, interest rate, and other details factor into the total cost of the loan. The auto is secured by the vehicle. If the customer defaults on the loan, the lender can repossess the vehicle to satisfy the loan. If the lender does not sell the vehicle at a high enough price to pay off the loan, the customer is generally required to pay the difference.