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What does the APR on a car loan mean?
I’m in the market for a new car, but I need a loan to get one. I’ve been reading about interest rates, but I also see APR. What does the APR on an auto loan mean? How does it differ from the interest rate?
Eric Schad · Updated on
Reviewed by Shannon Martin, Licensed Insurance Agent.
Learning the difference between
APR
and interest rate on a car loan
is an ideal way to know how much you’re paying and where your money is going! APR, or annual percentage rate, is the amount you pay on a car loan each year including interest, fees, taxes, and other charges. Interest rates are just the interest without the inclusion of any other charges.As a result, your APR is always going to be a bit higher than the interest rate. But if you want to determine the total amount you’re going to pay on top of the principal, always use the APR for your calculations.
Lenders quote rates in APR in most cases. If you want to know your interest rate, ask your lender. They should supply you with both the interest rate and APR.
If you want to lower your APR, you may want to consider a few of these options:
- Make a largerdownpayment
- Pick a shorter loan term
- Pay any fees, taxes, or charges out of pocket instead of rolling them into the loan
- Shop around to find the best rate
Since you’re financing a new car, be aware that the lender will require full coverage car insurance for the duration of the loan. As a result, shopping around for car insurance can save you thousands over the life of the loan while allowing you to adhere to your budget. So for the sake of brevity and ease of use, download the Jerry app to search car insurance rates.
As a licensed broker,
Jerry
helps you find and compare quotes from over 50 top providers in minutes. When you find an excellent rate, Jerry can help you buy your new coverage and even cancel or transfer your old policy! Customers save an average of $879 per year!View full answer
- Gregory R.
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Jerry partners with more than 50 insurance companies, but our content is independently researched, written, and fact-checked by our team of editors and agents. We aren’t paid for reviews or other content.
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