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What Is a Car Note? Read This Before You Purchase a Car Loan

  • Auto Refinance
  • Sara Sam
  • 5 minutes

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Purchasing a car is a goal that many of us want to achieve during our lifetime. Having a car certainly makes life easier. However, for the majority of car owners, it involves the tedious process of obtaining car loans and making car note payments. Therefore, everyone who might have taken a car loan might be familiar with the term car note. However, it might be unheard of otherwise. So, we will dive into everything you need to know about car notes.

What is a car note?

A car note is nothing but a monthly payment made on a car loan. In other words, it gives structure to loan repayments. Therefore, when you purchase a car through financing or taking out a loan, you pay back the loan over a set period of time. Each payment you make in monthly installments is known as a car note.

Therefore, a car note is a term that is used to repay the loan in equal installments throughout the life of the loan.


  • It includes the principal amount borrowed and the interest charged.
  • The car note is determined by the loan amount, interest rate, and loan term.
  • The higher the down payment, the lower the car note.
  • Failure to make car note payments can result in an extra amount as late fees.

Meanwhile, if you are finding it difficult to the payments, then refinancing may be an option. Refinancing involves getting a new car loan with a lower interest rate and using the new loan to pay off the old loan. Consequently, it lowers the monthly payments and, as a result, the overall cost of the loan.

 Sign up for Way.com, your Auto Super App and save up to $3000 on your yearly car expenses.   

Car Notes and Car Loans: A Quick Look 

Since a car loan is a financial responsibility, here are several things you must know about car loans and car notes in general if you are planning to take one.

Loan Amount 

The total amount that was borrowed from a lender in order to buy a car is the loan amount. Depending on the situation, this amount may include the price of the car as well as taxes, title fees, and dealer fees.

Is there a bad car loan? Find Out!

Interest Rate 

The percentage that the lender adds to the loan amount as additional fees is known as the interest rate. It is based on a number of variables, such as the borrower’s credit score, the loan term, and the kind of vehicle being financed. In other words, it is the cost of borrowing money.

Loan Term 

The time that the borrower has been given to repay the loan is referred to as the loan term. Therefore, you will have a car note for each month until the loan term ends. The terms of most auto loans range from three to seven years.

When the loan term is stretched out over a longer period of time, the monthly payment made by the borrower will be lower; however, the total amount of interest paid will be higher.

However, if the loan term is reduced, the monthly payment amount will increase, but the total interest paid by the borrower will be lower over the course of the loan.

What is the average car loan length?

Down Payment 

A down payment is the amount of money paid in advance to purchase a car. The larger the down payment, the lower the monthly car note payment will be. If possible, it’s recommended to put down at least 20% of the car’s purchase price as a down payment.¬†

Prepayment Penalty and Late Payment Fees 

A car note is supposed to make you pay your monthly installments on time, not early or late. It might sound strange, but you can face a prepayment penalty for paying off your car loan early.

Similarly, if you do not pay the car note on time, you will be charged a late fee. Therefore, in order to not add on to the existing loan amount, it is crucial that you make the car note payment on time. 


This may be an option if you find yourself unable to make the payments on your loan. Refinancing is the process of obtaining a car loan with a lower interest rate and then using that new loan to pay off the previous loan. As a result, it could result in lower car notes as well as the overall cost of the loan. 

If you are finding it hard to keep up with the car notes, try refinancing with Way.com.  Here you get the best refinance options. Use our refinance loan calculator, compare the loan rates, prequalify, and save up to $1850 a year on your refinanced auto loan!

What qualifies you for a car note payment? 

Good credit score

If you are creditworthy, that would be the first thing your lenders look at. If your credit score is greater than 670, you have good credit. With a good credit score, your interest rates will be in check. As a result, your car note amount will be less. 


When you submit your tax return copies and your pay stubs, the creditors will verify your financial situation. In other words, they check whether you can repay the loan.

Low debt-to-income ratio 

The debt-to-income (DTI) ratio measures how much of your income is going towards your monthly debt payments. The DTI ratio should be no higher than 50% to be accepted for an auto loan.

Therefore, knowing what a car note is, makes your understanding of car loans better. It can certainly help you in your decision to finance your car, by comparing lenders and finding the best deal. Once you finalize the provider and take the loan, make your payments on time to avoid additional fees and penalties.


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