An auto loan is a type of financing that helps individuals purchase a vehicle. When someone takes out an auto loan, they borrow money from a lender, such as a bank or credit union, to buy a car. The borrower then agrees to pay back the loan amount, plus interest, over a set period, usually through monthly payments. The amount of the loan depends on the price of the vehicle and the borrower's creditworthiness. Interest rates can vary based on factors like credit score and loan term. If the borrower fails to make payments, the lender can repossess the vehicle.