Interest rates and APRs are two of the most important factors when it comes to car finance. They play a considerable role in determining how much your monthly payments equate to and whether or not you can afford the finance. But just how do they work, and what is a good interest rate or APR? We've got the answers below in this guide to all things car finance interest rates and APRs.
Low interest car finance
Essentially, the rate of interest dictates how much you’re going to pay the lender on top of the actual cost of the car you want. The lower the interest rate, the more affordable the repayments. Having a good credit score can give you access to lower interest rates, as can the amount you borrow, the length of the loan and size of your deposit. Essentially, you should research the available deals and aim to find ones offering the lowest interest rates. Do that, and you can see to it that your monthly payments stay on the lower side.
Car finance with a low APR
APR stands for Annual Percentage Rate and is the cost you pay each year to borrow money. These extra charges include those fees for taking out car financing. When you’re looking for deals, choose ones that have the lowest APRs because those deals can help you save money on your car purchase. There are also two types of APRs: representative and personal. Representative APR is what you see advertised by car finance companies, and Personal APR is the actual amount that you will pay. Having a good credit score likely means you'll be able to access car finance with a APR.
Can I get car finance with 0% interest?
There are some zero interest car finance deals out there, especially on brand new cars. Dealers often use it as an incentive to attract buyers with favourite rates that don't have any interest. To qualify for 0% interest car deals, you'll need to have an excellent credit rating and clearly demonstrate that you can afford the monthly repayments. You may also need to pay a higher deposit than usual and expect a shorter contract.