How to Get the Best APR on a Car Loan

The Annual Percentage Rate (APR) of your car loan is the yearly interest rate on any money you borrow from a lender. The APR includes such things as the principal, any taxes on the vehicle, and any interest and pre-paid finance charges that are a part of your loan.

A low APR on a car loan saves you money with your monthly payments and on the total amount paid in interest. It takes a bit of research, but you should find the best APR before you settle on a loan.

Part 1 of 3: Research your options

The first step when searching for a low APR is to research your options. Part of this includes getting a credit report and learning your credit score. Your credit score is one of the biggest influences on the APR for which you qualify. Some other items to research include comparing the interest rates offered by the various lenders you are interested in using and finding out how vehicle age, type, and other factors can affect the APR.

person filling out information for credit report

Step 1: Get your credit report. Start by getting a copy of your credit report from annualcreditreport.com, a site set up by the three national credit reporting agencies to supply free credit reports to consumers, as required by federal law.

  • Check it to see if you have any late payments, collections, or other negative information. Make sure it is accurate and free of errors.

Step 2: Check your credit score. Federal law dictates that the three national credit reporting agencies have to each give you one free credit report per year. Any more than that and you have to pay.

  • Alternatively, you can sign up for credit monitoring at one of the free credit sites, such as Credit Sesame or Credit Karma.

  • Note: While the credit score you receive won’t always be exactly same, it can give you an idea of your credit score.

Step 3: Check with your credit card company. Another option is to check with your credit card company to see if they provide free credit scoring information. Many credit card companies do this as a service to their card holders.

filling out information on credit union site

Step 4: Compare interest rates with various lenders. Find out the best rates available.

Step 5: Gather your paperwork. Get all required paperwork together to take to a lender. Loans with low documentation requirements often come with a higher interest rate.

Step 6: Consider two or three models of vehicles. Certain models may come with a higher interest rate.

Part 2 of 3: Shop around for interest rates

Once you know your credit score, compare the interest rates offered by the lenders you are interested in using. Among the various lenders you are looking at, find the best rates and terms available.

Step 1: Ask your bank. Talk to your local bank to find out the interest rate they can give you. You can also check with local credit unions. Their interest rates are often slightly lower than traditional banks.

Step 2: Call dealerships. Find out the interest rates of various car dealers in town by calling and asking to talk to the finance department.

  • Car dealers often offer special deals, including rebates, and have some of the best financing terms available.

Step 3: Shop online for auto loans. Because you can provide all documentation online, you aren’t limited to local financial institutions.

Part 3 of 3: Get financing in place

Now that you have chosen a potential lender, get all of the required paperwork together to take to the lender you chose. Keep in mind that loans with low documentation requirements often come with a higher interest rate.

Step 1: Get a loan. Get pre-approved for a loan before shopping for a vehicle. This allows you to focus only on the vehicles that fall within the amount you can borrow.

  • Even if you don’t decide to go with this lender, you can use the pre-approval as a negotiation tool.

Step 2: Choose your term length. Select a shorter term for your car loan, which often comes with a lower APR.

  • The bad thing about a short-term loan, though, are the higher monthly payments. But if you are okay with paying a higher price, then this is a good option.

Step 3: Ask a dealer to beat your pre-approval. Take your pre-approval to a car dealer to see if they can beat the terms. Most dealers want to make a sale so they might lower the APR they are offering in order to get you to finance your vehicle through them.

Step 4: Pay more up front. Increase your down payment to give you more room for negotiation.

  • By increasing the amount you pay up front, you decrease the amount you need to have financed. Couple that with a lower APR, and you can greatly reduce the amount you pay over the term of the loan.

Step 5: Ask about rebates. Find out if you can exchange some of the included bonuses given with a car for a lower APR. This may include cash rebates or special packages, which you can do without.

  • Tip: If you can’t get a low interest rate now and you need the car, choose the best loan and then refinance in six months for a better rate. By refinancing to a lower interest rate, you can save big, especially if the interest rate falls by a full point or two.

Step 6: Consider two or three models of vehicles. Certain models may come with a higher interest rate.

Finding a loan with a low APR is one sure way to save money when financing a vehicle. Just remember to have a pre-purchase car inspection performed by one of our expert mechanics before buying a used vehicle.


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Attila

19 years of experience
906 reviews
Attila
19 years of experience
Cadillac SRX V6-3.6L - Pre-purchase Car Inspection - Edison, New Jersey
Attila was great! Very knowledgeable and actually detected a fault during a pre-purchase inspection that would have cost me later.
Lexus ES350 - Pre-purchase Car Inspection - Fords, New Jersey
He is very good—offered all the significant details we needed from the inspection. Helped us figure out what needed to be fixed.

Shawn

12 years of experience
285 reviews
Shawn
12 years of experience
Chevrolet Impala V6-3.6L - Pre-purchase Car Inspection - Lansdale, Pennsylvania
Shawn was prompt, professional, and delivered the promised service as expected. This was a used vehicle pre-purchase inspection. Shawn also had to drive to multiple locations to perform the inspection, as the address listed that I provided him with was not accurate, but he still made it to the correct location within his time window and completed the inspection.
Toyota Sequoia - Pre-purchase Car Inspection - Akron, Pennsylvania
Shawn was very prompt in communicating with me and was good at helping me decide whether to purchase a used car. He help me avoid a car with a repaired rusted frame that could be a danger to my family's safety since we were planning on using the car to tow a travel trailer!

Luis

18 years of experience
320 reviews
Luis
18 years of experience
Honda HR-V L4-1.8L - Pre-purchase Car Inspection - Warren, New Jersey
Luis was great. He showed up on time, acted professionally, and gave me confidence with a pre-purchase car inspection.
Acura RDX - Pre-purchase Car Inspection - South Hackensack, New Jersey
Luis did a thorough pre-purchase inspection for me, and found several major issues that made me pass on buying the car. Had I purchased the car, I almost certainly would have ended up paying thousands in repairs down the road. Thanks Luis!

Robert

20 years of experience
1089 reviews
Robert
20 years of experience
Hyundai Elantra L4-2.0L - Pre-purchase Car Inspection - Englewood, Colorado
He did a pre-purchase inspection for me. He was knowledgeable and fast, and knew what he was looking for. I really appreciate all the pictures and documentation he took of the state of the car before purchase. He noted potential issues with the car that I wouldn't have been able to notice. Would recommend.
GMC Savana 1500 - Pre-purchase Car Inspection - Golden, Colorado
I trust Robert. He gave me a list and we will take care of it the week of June 29. I will know then that my vehicle is ready for the winter and is safe to drive. I look forward to getting things ready for another winter of careful driving.

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