A car loan is secured against the vehicle you intend to purchase, which means the vehicle serves as collateral for the loan. If you default on your repayments, the lender can seize the auto. The loan is paid off in fixed installments throughout the loan. Much like a mortgage, the lender retains ownership over the asset until you make the final payment. When you take out a car loan from a financial institution, you receive your money in a lump sum, then pay it back (plus interest) over time. How much you borrow, how much time you take to pay it back and your interest rate all affect the size of your monthly payment.