What is APR for a Car Loan?

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What is APR for a Car Loan?

If you’ve been shopping around for a new or used car loan for a while, you may have seen the term APR pop up once or twice. While some equate this to mean the same thing as interest rates, they are actually two separate things.

So, what exactly is APR?

What is APR for a car loan? Understanding what APR means, as well as the differences between it and interest rates can help you better understand what goes into your monthly car payments. When applying for a loan, make sure to take both the APR and the interest rates into account so you can best adjust for your budgets.

What is APR?
APR stands for Annual Percentage Rate. While this may look like the same thing as an average interest rate, it’s actually different. The Annual Percentage Rate is a special rate that you pay each year to borrow money. This includes all fees as well.

So, whenever you borrow money in a yearly period, you will owe a certain rate which is expressed as a percentage. Typically, APR is quite low, and doesn’t take a lot of extra money out of your wallet. It is, however, an important part of the money borrowing process, and an equally important part of budgeting.

What is the Difference between APR and Interest Rates?
Interest rates and APR are equally important parts of the price you pay for borrowing money. In this case, they both go into the price you pay for your car loan. There is, however, a bit of a difference between the two:

An interest rate is a percentage of what you pay each year to borrow money, but this does not include fees charged for your loan.
APR is a percentage of what you pay each year to borrow money, plus all fees. It is a broader part of the cost you pay to borrow money.

When you are in a loan negotiating situation, it’s important that you ask for the lowest APR available. Be up front about your request, as lenders are not legally required to offer the best rates up front. Ask for the best interest rate, and the lowest APR to save you money in your bank.

Use Our Loan Calculator to Help You Find the Best Rates!
By using our free online payment plan calculator, you can determine how much money you can afford to spend on monthly car payments. This includes the cost of loans, with the added interest rates and APR on top. If you’re interested in getting the best rates possible, you can sign up with us and fill out a simple application to connect you to the best loans possible. No matter your credit situation, or your budgeting requirements, we can use our knowledge and expertise to find the right payment plan for you!