Skip the auto shop - Our mechanics make house calls

How to Get the Best APR on a Car Loan

glasses and pen on top of paper

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.

The statements expressed above are only for informational purposes and should be independently verified. Please see our terms of service for more details
Icon-warranty_badge-02

Skip the repair shop, our top-rated mechanics come to you.

At your home or office

Choose from 600+ repair, maintenance & diagnostic services. Our top-rated mechanics bring all parts & tools to your location.

Fair & transparent pricing

See labor & parts costs upfront, so you can book with confidence.

12-month, 12,000-mile warranty

Our services are backed by a 12-month, 12,000-mile warranty for your peace of mind.

Get A Quote

Need Help With Your Car?

Our certified mobile mechanics make house calls in over 2,000 U.S. cities. Fast, free online quotes for your car repair.

GET A QUOTE

More related articles

How to Avoid Back Pain in a Car
If you have back problems, sitting in a car for an extended period of time can be excruciating. Even without back problems, you could experience discomfort and soreness from...
P2422 OBD-II Trouble Code: Evaporative Emissions Control System (EVAP) Vent Valve Stuck Closed
Diagnostic Trouble Code (DTC): P2422 P2422 code definition Evaporative Emissions Control System (EVAP)...
What are the Car Pool Rules in Hawaii?
Hawaii is widely regarded as a land of vacation and relaxation, and as such, its scenic roads and routes are far better known than the state’s freeways. But, as with all...


Related questions

Q: Car has power reduction and grinding noise

Hello. From the symptoms you are describing it would appear that the vehicle may be experiencing some sort of mechanical issue with the engine or transmission. The issues may or may not be related, however that should not be an...

Q: Loud pop and difficult steering from loose front spring. 1997 Mercedes-Benz E300

There is not much that can be done to prevent something like this. I would suggest possibly having the same mechanic look into potentially welding that cavity area closed in an effort to not allow water to sit in this area...

Q: Where could I find a TSB for my 2005 mustang GT regarding my Throttle body or Throttle Position Sensor?

I went through all the technical bulletins and recalls and did not find anything for reprogramming your computer or repairs to the TPS or throttle body. The ones that you are not finding may not be the right ones. I...