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What is A Good APR for A Car?

This blog post will examine what an APR is in auto loan financing, factors that impact it, and what to search for to buy your next vehicle.
Written by
Bella Ward, Mar 14, 2024

When contemplating how to finance a vehicle, one of the most crucial aspects to consider is the Annual Percentage Rate (APR) of the loan.

The APR plays a more significant role than merely determining the total amount you will pay back to the lender; it also impacts the monthly payments.

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Knowing what qualifies as a “good” APR for a car can save you money and guarantee that you are treated equitably by the lender for your auto loan.

In summary, this blog post will examine what an APR is in auto loan financing, factors that impact it, and what to search for to buy your next vehicle.


An APR refers to the annual cost of borrowing money, such as the interest and other fees, as a percentage.

It provides a broader perspective on the cost of money than the simple interest rate since it takes into account charges and fees related to the loan.

What Influences Your APR?

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There are several factors that can impact the APR you’ll be offered on a car loan:

  • Your Credit Score: Likely the most critical factor, a high credit score tells lenders you’re a low-risk borrower and can thus qualify you for a lower APR.
  • Loan Term: Generally, the shorter the loan term, the lower the APR. When you repay your loan in less time, lenders assume less risk and pass those savings on to you.
  • New vs. Used: New cars come with lower APRs, as their higher resale value means there’s a lower risk to the lender.
  • Type of Lender: Different lenders, such as banks, credit unions, and dealership financing departments, offer different APRs.

What’s a Good APR for a Car?

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What’s considered a “good” APR can vary widely, based on market conditions, your financial position, and the above factors.

At the time of my last update in April 2023, here’s a rough guide to what might be considered a “good” APR:

  • Excellent Credit (740+): For those with exceptional credit, a great APR can be between 2-3% for new cars and 3-4% for used cars.
  • Good Credit (670-739): Those with good credit may expect an APR between 4-5% for new cars and 5-6% for used cars.
  • Fair Credit (580-669): Borrowers with fair credit can see an APR between 7-10% for new cars and 10-14% for used cars.
  • Bad Credit (<580): Borrowers with poor credit may see APRs north of 14%, some even much higher.

These are ranges and can fluctuate based on the broader economic picture, including the Federal Reserve’s interest rates.

How to Capture a Good APR

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  • Boost Your Credit Score: Over time, paying down debt and making payments promptly can raise your credit score, lowering the APR you can obtain.
  • Shop Around: Avoid accepting one offer and search for the best potential APR from numerous lenders.
  • Get a Shorter Loan Term: Shorter loan terms indicate that the lender is taking less danger, and many automobile creditors pass savings on to clients through a lower APR.
  • Get a Larger Down Payment: A larger down payment lowers risk for the lender by lowering the total loan amount possible, possibly resulting in a lower APR.


Knowing what a good APR for a car loan is and how to obtain the greatest APR can save you a lot of money spent on the purchase of the vehicle.

By putting your credit to order, talking terms with several dealers about the most advantageous offer, and agreeing on the most beneficial offer taking low monthly payment interest and loan repayment feels, you guarantee that the loan is honest.


Typically, the car’s most affordable APR is the best one major candidates can acquire, but the minimum cost of the entire loan and capability to pay for it is also more important.

Frequently Asked Questions (FAQs)

What is a good APR for a car loan?

A good APR for a car loan may vary depending on your credit score, the economy, and the lender's policy. Typically, for new cars, good APR ranges between 2% to 3%, and for used cars, it ranges between 3% to 4% for individuals with excellent credit scores (740+). APR may increase as the credit score decreases.

How does my credit score affect my car loan APR?

Your credit score significantly influences the APR on a car loan. A higher credit score indicates a lower risk to the lender, leading to lower APRs, while a lower score suggests a higher risk, resulting in higher APRs.

Can I negotiate the APR on my car loan?

Yes, it's possible to negotiate the APR for your car loan. This process is often more straightforward if you have a strong credit history or pre-approved financing offers from other lenders. Don't hesitate to ask for better terms or explore options with other financiers.

Why is the APR higher for used cars?

APRs are typically higher for used cars due to their lower resale value and the higher risk they pose to lenders. The borrower ends up paying for this increased risk.

How can I get a lower APR on my car loan?

You can lower the APR on your car loan by improving your credit score, shopping around for better rates, opting for a shorter loan term, and making a larger down payment.

Should I finance through a dealership or a bank?

Whether to finance through a dealership or a bank depends on the rates you qualify for. While dealerships may offer special promotional rates, especially for buyers with excellent credit, banks and credit unions might provide more competitive rates. It's best to get offers from multiple sources and compare them.

What's the difference between APR and the interest rate?

The interest rate is the cost of borrowing the principal loan amount, while the APR includes the interest rate plus any other charges or fees, offering a more comprehensive view of the borrowing cost.

Should I always prefer a lower APR?

Generally, a lower APR reduces the interest you'll pay. However, you should also consider the total cost of the loan, including any fees and the loan term. In some instances, a slightly higher APR with no fees or a shorter term could be a better choice.

Can the APR change after I've taken out the loan?

For fixed-rate loans, the APR should not change. However, for variable-rate loans, the APR can adjust based on changes in market interest rates.

Is it recommended to use an APR calculator when shopping for a car loan?

Yes, using an APR calculator can provide you with estimated total and monthly costs based on different APRs, helping you make a more informed decision when purchasing a vehicle.

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