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Meaning of APR On A Car Loan In Campbellville

Meaning of APR On A Car Loan In Campbellville

Auto loans are ruled by their Annual Percentage Rate, APR. It’s what makes a loan competitive or unaffordable and has a huge influence over whether you take the loan or not. But what is the APR? How is APR on a car loan calculated? How can you find out what APR you’re paying? Our Campbellville auto loans team explains.


Auto loan APR


Auto loan APR is the price you pay for borrowing the amount you need to buy a car. Interest is charged by lenders partly to cover their own borrowing costs and to provide some profit.


A lender will often borrow cash from other institutions so it can lend that money to you. They will be paying interest on that loan. The interest you pay will cover that interest plus a little something extra so the lender can make a profit themselves.


Those amounts result in the APR you pay.


How is auto loan APR calculated?


Auto loan interest is calculated using the above plus your credit score, the amount being borrowed and the time you’ll be borrowing it over. The lender will make the calculation based on all of those to come up with a figure.


If you want to get into the math of APR, good luck. It can be quite complicated but this guide has a complete breakdown of how interest is charged in different scenarios.


How can you find out what APR you’re paying?


If you already have an auto loan and want to find out the interest rate, that should be simple. It should be on your loan paperwork as it forms part of the agreement.


There should be a breakdown of the loan on your contract that outlines the principal amount, the loan term and the interest rate you’re being charged. That rate is fixed for the term of the loan, so the APR you see will be the APR you’re paying.


If you cannot find your loan paperwork, check your online account with the lender if you have one or give them a call. The company should tell you exactly what rate you’re paying.


Why APR is important for auto loans


The interest rate on any loan is what makes it a good deal, or not. The principal amount, the amount you borrow is the same whatever loan you go for, it’s the interest rate that makes the loan a good deal or an expensive one.


For example, if you’re looking to buy a car worth $35,000 and have $12,000 as a deposit, you’ll want a $23,000 auto loan. Borrowed over 48 months, a 5% APR loan will cost $778.39 per month while a 6% loan will cost $793.79 per month.


Over the 4 years, that’s over $500 more in interest!


Extend that to a 72 month loan and you’ll pay an extra $1,138.82!


That’s why auto loan APR is such a hot topic and why it’s always a good idea to shop around for the lowest rate.


If you’re looking for a great deal on an auto loan in Campbellville, contact our team today.


Contact Unique Chrysler for help, advice and competitive Campbellville car finance and leasing.


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