As with any type of credit, the depreciation schedule is an essential document to understand the characteristics of your next car loan.
It is also an essential element to compare the different proposals made to you, in order to choose the one that suits you best.
What is found in a depreciation schedule
An amortization schedule includes as many lines as repayment dates (in general, repayments are in monthly installments). This allows to know precisely, every month, what we will pay. This is all the more significant when it comes to a loan where the maturity is not fixed.
At the level of the columns, one finds there everything that composes the monthly payment. With always separate components: the share of capital repaid at each repayment, the amount of interest calculated according to the loan formula, and the cost of insurance.
This allows us to understand the classic operation of a depreciable credit: the more we advance in time, the more we repay capital and the less we pay interest.
Finally, the amortization table also highlights the costs associated with setting up the credit (administrative fees, security costs, etc.) as well as the total cost of credit over the full term.
What is the usefulness of a depreciation schedule for a car loan?
To make a credit for the purchase of a vehicle is a step that is not negligible, for several reasons. The first is that the sum at stake usually starts to be quite significant, especially compared to what can be obtained in a revolving loan.
This is why a car loan is usually a depreciable loan, with deadlines planned from the start and an end date. The second reason, linked to the first, is that it is an approach that commits you for several years.
Making a bad choice in setting up a car loan has consequences, both on the monthly budget, and also on the total cost of credit, which is far from negligible. That’s why the depreciation schedule is a regulatory document that needs to be understood and analyzed before signing and committing.
How to use the depreciation table to make the right choice
It is advisable to obtain a depreciation schedule from all credit organizations that will make a car loan proposal. This is the only way to compare offers in an exhaustive way, because to be satisfied with an amount to be refunded and a duration does not allow to have all the elements.
It is important to first look at the amount of each monthly payment. It is a simple thing to do when it is constant, and it is often the case in a car loan.
In addition, the amortization schedule provides a complete view of what the credit will cost, over the life of the loan. It is easier to reason in USD (with the total amount of maturity that includes the repayment of capital, interest, insurance …) that interest rate.
Indeed, some organizations put forward a tempting rate, which does not necessarily take into account other components, such as insurance or fees.
It is finally the only document which details, month by month, what remains to repay until the end. It is therefore a good indicator if, for example, the borrower plans to repay his credit in advance before the end of the loan.
An amortization table for a car loan is therefore a very rich document. It allows for a clear and precise vision of what will be the monthly repayment, a complete view of the cost of credit, and a contractual situation for the entire duration of the loan.
It is also a document that commits both the lender and the borrower. It is therefore to consider very carefully.