The Average APR on Car Loans

by Steve Lander
How much you spend can be as important as your APR.

Calculating the average APR, or annual percentage rate, on car loans can be a bit challenging. Although the math is simple, the variables aren't. The average car loan APR might not actually have a lot to tell you, because loans vary based on the type of vehicle you buy, the length of your loan and your negotiating ability. Your credit score also can have a significant effect on your rate.

National Average Loan Rates

According to data from Bankrate.com, the national average rate for a 60-month new car loan was 4.04 percent as of Oct. 31, 2013. Shortening your loan to 48 months would drop your rate to 3.95 percent. A 36-month, used-car loan carried an average rate of 4.51 percent.

Credit Scores and Rates

Data from the FICO company tracks car loan rates relative to credit scores. Based on its information, the average rate for a 60-month new car loan as of Nov. 4, 2013, was 3.46 percent if you had a credit score of 720 or higher. The average APR goes up as your credit score goes down, though. While a credit score between 690 and 719 netted you a 4.85 percent loan, having a credit score between 620 and 659 would leave you with a 10.90 percent interest rate. A score in the 500s could lead to a 17.05 percent APR.

Minimizing Your APR

The first step in getting a loan that is as low as possible is to know where you stand by checking your credit. That way, you can fix any issues before you apply. You will also know if the lender is making you a fair offer because, for instance, it can't tell you that you have to settle for a high APR because you have bad credit when you know you actually don't. Once you have your credit ready to roll, the next step is to shop around. Talking to a few lenders, including some banks and credit unions, will give you a sense of what kind of loans are available. If you walk into the dealer with a loan already in place, you won't be at the mercy of the finance office.

Does Interest Matter?

It's true that the lower your interest rate, the more money you save. However, your interest rate isn't the only factor that comes into play in a car loan. The amount you borrow also affects your payments. For example, if you're looking at two reasonably priced used cars, one costing $8,000 and one costing $9,000, the price difference between them can swallow up a big change in interest rates. For instance, the monthly payment on a $9,000, 48-month loan at 5.24 percent is about $208. However, if you only borrow $8,000 but you get stuck with a 10.30 percent loan, your payment will still be lower -- about $204 per month. With this in mind, shop around for a good loan, but remember that shopping around for a good deal on a car also will save you money.

References

About the Author

Steve Lander has been a writer since 1996, with experience in the fields of financial services, real estate and technology. His work has appeared in trade publications such as the "Minnesota Real Estate Journal" and "Minnesota Multi-Housing Association Advocate." Lander holds a Bachelor of Arts in political science from Columbia University.

Photo Credits

  • Barry Austin Photography/Photodisc/Getty Images
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sep ira guidelinesauto fico scorerepossed housemeaning of contingent liabilityhow do i calculate my agi from my w2sell gold nuggetsbrighthouse pay your billintrinsic value of a stock calculatorr values of insulation chartreinstate car insuranceadvantages of soleproprietorshipis an insurance company a financial intermediarywhat does well qualified lessee meankeystone government loan programsample bursary application lettercalculating standard deviation of a portfoliowalmart computershare comirs 1040 schedule b instructionswho gets charged for a bounced checkpros and cons of common stockmerits and demerits of npvcapital one auto finance repossession departmentroth ira agifederal w4p formhow much is 10k gold per gramexperian telephone number live personnra college scholarshipsgap credit card customer servicewho uses transunionstudent tax write offsfull form of hipaahow to fight social security disability denialpayback method advantagesauto fico scoreaddress of bank of america for wire transfersqmb cardcapital lease templatecorpbank internet bankingbond effective durationwarranty of habitability new yorkeasement ontariowho pays the gift tax recipient or giverwww ebtedge com accountgift to foreign person annual exclusioncheck cashing processwells fargo atm withdrawal limitsgrantor and granteevaluable morgan dollarsformula of dividend yieldbuying your leased car at the end of the leasecoinflation silver dollarcredit score tierswhat qualifies as a first time home buyerfinancial accounting thesis topicswww compass ga gov child carehow long does it take for wired money to arrivepatriot bondshow to qualify for an fha loan with bad creditwa state statute of limitations on debtwells fargo wire routing numbersecond home purchase tax deductionshow to activate mastercardfuture value compounded semi annually calculatorpaypal instant withdrawalhow much will insurance pay for my totaled carcredit report ratings scalewho can use 1040ezhow to calculate paying off mortgage earlyaarp medicare advantagehud bidsmacy.com my macyscarddevalued dollarmaverick gas cardrestricted mileage car insurancekmart weekly circularrevocable trust software
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