What's a Car Note?

A car note is a loan agreement between you and a lender financing your vehicle purchase. It typically spells out important details of your loan. 

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If you’re going to borrow money to buy a car, it’s important to know what a car note is and what you’re promising by signing the contract. We’ll go over what’s included in a car note, the different types and how it compares to both a loan and a lease.

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Car note meaning: What’s included?

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When you borrow money to buy a car, the lender writes a car note, meaning a contract that states what you’ll borrow and how much you’ll pay.

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Your car note will include important details about the loan, so you know exactly what you’re agreeing to. These details include:

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• Loan amount: How much money you’ll borrow, also known as the principal.
• Interest rate: What it will cost to borrow the money, shown as a percentage of the loan amount. The difference between interest rates vs. APR is that the APR (annual percentage rate) also includes the lender’s fees, showing you what it would cost in a year.
• Loan term: How long the loan will last. Car loans are usually between 36 and 72 months long.
• Monthly payments: What you’ll pay each month. These are typically the same each month if you have a fixed interest rate, which is most common.
• Lender details: The name and contact information for the lender and where to send your payments.
• Repayment terms: Usually, if you fail to make your payments, the lender has the right to take the car back, leaving you without a ride (and with a dent in your credit).

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Car note vs. Car payment: What’s the difference?

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Some people use the term “car note” to mean what they owe on their car each month. But there’s a difference between a car note vs. a car payment. The car note is the entire loan agreement, while the car payment is the amount you pay toward the loan each month. You might have a $20,000 car note but a $500 car payment.

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Types of car notes

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There are many ways to finance a car, so there are many types of car notes, too. Each type has different rates and terms. 

• Fixed-rate: This type of car note has one interest rate that doesn’t change, so your payments stay the same each month.
• Variable-rate: Car notes with a rate that changes periodically mean your payments can change periodically, too.
• New car: Car notes for new cars tend to have lower interest rates.
• Used car: Used car loans tend to have higher interest rates.
• Refinance: Refinancing replaces your old car note with a new one.
• Lease: Leasing a car lets you drive it for a period, such as three years, before returning it. Think of it as borrowing compared to owning.

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Looking for better terms on your car note?

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After you buy a car, you don’t have to be stuck with the same car note. You can replace it with a new one if you want better loan terms. Refinancing your existing car note means you’ll get a new car note with a different interest rate and a monthly payment that may work better for your budget. You may want to refinance your car loan if your credit has improved, as you might be able to secure a lower payment or interest rate.

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Start the refinancing process today with a soft credit pull to determine how much you might lower your interest or save on monthly payments. 

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FAQs

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Understand more about car notes by reading our most frequently asked questions below.

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What does having a car note mean?

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If you have a car note, it means you got your car through an agreement with either a lender or a leasing company. The car note is a contract that spells out what you owe and how much you’ll pay for your car. When the note is paid off, it means you’ll either own the car outright or it’s time to return it to the leasing company. 

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Is a car note a lease or a loan?

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You can have a car note with both a lease and a loan. Both are ways to finance a car for a time. The difference is that if your car note is a loan, you’ll own the car at the end of the term. If it’s a lease, you’ll either have to return the car or buy out your lease.

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Is a car note the same as having a car loan?

Many people use the term “car note” to mean the same thing as a car loan, which is why you might hear people referring to their car note when talking about making loan payments. But the car note is simply the contract that details your loan agreement, not the loan itself.

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Can I reduce my monthly car note payment?

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Yes, there are ways to lower your monthly car payment. Refinancing your car loan with a new note that has different terms is a popular way to get a monthly payment that works better for you and your budget. RefiJet offers auto refinancing that can help you find a better car note for your needs.

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