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How is the APR calculated on a car loan?
What kind of information do lenders use for APR calculations on a car loan? I’m just wondering if there’s anything I can do to get a better APR.
Liz Jenson · Updated on
Reviewed by Shannon Martin, Licensed Insurance Agent.
APR or annual percentage rate is an important part of your loan, so it’s great you’re looking at ways to improve it. The APR on a car loan is largely based on your credit score. Borrowers with excellent credit will see a much lower APR than borrowers with low or limited credit.
If improving your credit score isn’t feasible, there are two things you can do:
- Decrease your loan term. 72 and 80-month car loans tend to come with much higher APRs than 60-month loans and below.
- Make a **large downpayment. When you do this, you lower your risk as a borrower. Since a lender won’t have to finance the car’s entire value, they will generally offer a lower APR.
When you buy a new car, you’ll also need insurance. It’s easy to find the best rates with the
Jerry
app! Just download the app and answer some quick questions to see your policy options in a comprehensive list. The average user saves $879 a year. View full answer
- Gregory R.
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