An auto loan is a secured loan that carries interest. What this means is that you borrow money from a lender, and that, if you don't pay it back, the lender will repossess the car. The lender does business with you because there is a profit to be earned on the transaction in the form of interest. Each month you will repay a portion of the principal you have borrowed, and a certain amount in interest. In the end, you will pay back more than you borrowed. There are also charges and taxes to be paid when you purchase a car with financing.