Why Is APR Important for a Car Loan?
When it comes to auto loan rates, one of the most important factors to consider is the annual percentage rate (APR). The average APR for car loan offers includes interest and all fees that you pay for your car’s financing every year.
The fees you are charged for the auto loan are not included in the interest rate, but they are included in the APR. Therefore, the APR does a better job reflecting the total cost of your loan every year.
Your APR can vary widely and is mostly determined by your credit score. That is why you should check your credit score regularly and pay attention to it before you begin the loan application process. If your credit score is low, you may pay more interest.
For example, as of June 2022, if you have a prime credit score (661+), your average car loan APR could be as low as 3.5%. With a non-prime credit score (601-660), you will see average rates of around 6.5%, and if you have a subprime score (under 600), you could see APR rates of 11% or more.
While auto loan rates may vary dramatically over time, as of August 2022, the best current rates from Bank of America are around 4.2% APR for a 60-month auto loan, whereas Chase auto loan rates currently stand at around 5% APR for refinancing loans.
Use a car loan calculator to compare different loan offers available to you. You should not only consider your monthly payment but also how much you will be paying for the life of the loan.
Low monthly repayments may seem beneficial, but longer loan periods mean you will pay more interest over time.
💡 Tip: Use the Financer.com car loan calculator to find the best auto loan rates from lenders in the U.S.