What Is a Good APR for a Car Loan?
Shopping for cars at a dealership can be an overwhelming experience. You may feel tempted to accept the first loan offer the dealership gives you to avoid passing up on a car you really like. If you're not familiar with car loans and terms like "APR," understanding the loan offer might be a bit challenging.
So what is a good APR for a car loan, and how can you improve your car loan interest rates at the dealership? Here's everything you need to know as a customer.
If you're a dealer, check out the financial services for car dealers by
Edge Financial.
Exploring the Best APR for Auto Loans
APR stands for annual percentage rate. It's a percentage of the loan you're borrowing plus any additional fees you must pay to secure a car loan. You can think of it as the interest rate but with a few more expenses factored in.
APR is one of the main factors affecting the cost of a loan. Many car loans last for at least 72 months, which means your APR can equate to a significant amount of money. Looking for low-APR car loans reduces the overall cost of financing a vehicle with a loan, but that process starts with knowing what a good APR for a car loan looks like.
What Is a Good APR for a Car Loan?
The average APR for car loans vary from year to year depending on the economy as a whole. But a typical "good" APR for a car loan sits somewhere between 4% and 8%.
For reference, let's say you are borrowing a $20,000 car loan across a 36-month (three-year) term. Assuming you don't pay any fees upfront:
- A 4% APR would leave you with a monthly payment of $590, and the total you would pay back over the loan term is $21,257.
- An 8% APR would leave you with a monthly payment of $626, and the total you would pay back over the loan term is $22,562.
While an APR above 8% may be manageable, it translates to an even greater monthly payment and payback amount.
Other Factors Affecting Car Financing Costs
APR is only one factor contributing to the overall cost of a car loan. You must weigh all of the expenses incorporated into your loan to determine whether it makes financial sense.
Car loans always include a loan term, which is the amount of time you have to pay off the loan. The longer your loan term, the more you end up paying in interest by the end of the loan, but the lower your monthly payment.
The total loan amount also impacts your costs. A higher APR may make more sense for a smaller loan, as the amount of interest you'll pay may be negligible.
Consider the entire monthly cost and the total amount you will pay by the end of the loan when making a decision about what is a good APR for a car loan is.
Tips To Improve Your Loan Offer
If you're having trouble securing competitive car loan rates, consider these tips to help you qualify for a lower APR:
- Take time to boost your credit score by making on-time loan payments, paying off debts, and lowering your credit utilization ratio.
- Shop around for a better offer; you don't have to fund a loan directly through a car dealership in the U.S.
- Consider a shorter-term loan, as dealers sometimes charge lower APRs on these loans.
- Use an auto loan interest comparison tool to understand how different rates and terms affect your costs.
Need Help Securing a Car Loan With a Good APR?
At Edge Financial Services LLC, we help car buyers secure fair financing through auto dealers. Even if you have less-than-perfect credit, we can help you find a good APR for a car loan.
Contact us today at (866) 890-2415 to explore car financing rates and options.



