How to Get a Good APR on a Car Loan

Getting a good APR on a car loan will save you a lot of money over the term of the loan. There are several factors that determine the interest rate, such as credit score and age of the car, and being prepared will ensure you are in a position to obtain the best rate possible.

Your Credit History

The biggest factor in determining your APR is your credit score. If you have a great score, then you have leveraging power in getting a great rate. If you score is sub-par, then you should do some work to improve it before applying for a loan. Pay down high balance cards so they are below thirty percent of the limit. Pay all of your bills on time, and don't apply for any other new credit. Once you have followed these rules your score should rise.

Age of Car

New cars will get you a better interest rate. If you are buying used, then you will notice that the older the car, the higher the rate. So be prepared that if you buying a used car that is quite old because you will not get the same rate as someone purchasing a brand new automobile.


There are three options for lenders who will offer you financing: a credit union, bank or the dealer. A credit union will give you great rates, but they are strict about credit and income, and if you are not a model borrower, you will be denied. A bank is also a good option, especially if you have been a customer of theirs for a long time or have other loans with them. Research current interest rates so you know what the going rate is.

The dealer can be a great choice, but they can easily take advantage of borrowers and give them a bad deal. The dealer purchases wholesale loans, so they receive very low interest rates on the loans they purchase. In return, they make you an offer that is higher than the rate they are getting. They make money off of  you this way. But sometimes, they mark these loans up very high, much higher than the rate you would get at a bank. This is why you need to be knowledgeable about current rates so you know when you are getting a great deal.

Loan Terms

Taking out a long car loan will cost you in two ways: paying interest over a longer period of time, and paying a higher interest rate. A lender will offer you a lower rate for a shorter term since you a lesser risk than if you had a longer term. If you can afford a three year loan instead of a five, you will pay substantially less over the term of the loan.

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