Are you ready to purchase a new or used vehicle? If you don’t have the cash to pay for the vehicle in full and you aren’t willing to sign a lease, you will likely seek financing. However, you should know a few things before you sign on the dotted line, including any fees you have to pay, your downpayment amount, and your interest rate and APR. This is what you should know about your APR.
What Is APR?
When you sign the papers after you find your new Kia for sale, you learn about the interest rate on your loan. This is the rate of interest on your loan each year. This is a very simple calculation. However, the annual percentage rate is a bit different. APR includes every fee you have to pay when you finance your vehicle.
What Is the Difference Between Fixed and Variable APRS?
When you get a loan with a fixed interest rate and APR, this amount will never change over the length of the loan. With variable-rate loans, your rate changes based on the Federal Reserve’s rate decision. Unfortunately, you cannot guarantee that your rate will eventually decrease. As your rate changes, so will your monthly payment.
What Factors Impact APR?
Your financing company determines your APR and interest rate by a number of factors. First, your credit score can significantly impact your rates. In fact, high credit scores may result in a zero percent interest rate, but the rate increases the lower your score is.
Because your vehicle loses the most value during its first few years, your rate may also be lower on a used than a new car. In addition, you borrow less money on a used truck, which lowers your rates. Short-term loans have lower risk, so interest rates tend to be lower than long-term loans. Also, you can lower your rates when you increase your downpayment.
How Can You Get Your APR Calculation?
You can find APR calculators online. As long as you know your car price, loan term, down payment, and interest rate, you can get an estimated loan payment. However, to get your APR, you need additional details, including all the fees.
Instead, you should ask your financier for the APR. These professionals may also break this figure down into the fees you will pay.
Who Offers the Best APR?
Have you worked with a dealership to find vehicle financing? Although financial institutions, such as banks, tend to offer the best rates, a dealership can submit your application to multiple lenders at once, allowing you to compare rates. In addition, some dealerships will finance your purchase. You can often get much faster responses and distribution through a dealership as well.
How APR Impacts Your Loan
Your APR has a direct impact on your monthly payments and the total amount you pay for your vehicle. It will tell you how much your loan costs you every year based on your payment schedule. Different lenders have different fees, which can lower or raise your payments.
Know Your APR
As you do your research on your next vehicle purchase, research your financing options as well as their advantages and disadvantages. Remember to get a clear understanding of your APR and other factors that can impact your loan cost.
