What Does Representative APR Mean?

APR, PCP, HP – the world of car finance is full of acronyms, but don’t panic; we’re here to help cut through the jargon.

APR is arguably the most important of these shorthand phrases to understand as it’s directly tied to the cost of your car finance.

As much as we’d all love finance providers to lend us the money we need to buy our new car and not expect anything in return, in the vast majority of cases, they’ll ask you to pay interest. That interest – plus any extra fees and charges involved - is represented by the APR.

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What’s a representative APR?

When you start searching for a car finance loan, there’s one acronym that you’ll start to see pop up everywhere you look: representative APR.
Generally speaking, the lower the representative APR, the better.
But why does representative APR matter?
The representative APR helps to explain the cost of borrowing money and makes it easier to compare different loans.
When a car loan is advertised with a certain representative APR this indicates that at least 51% of borrowers will receive a rate that is equal to, or lower than, this rate.
Keep in mind that it doesn’t mean the rate you’re offered won’t be higher than this the representative APR; depending on your individual circumstances, you could make up part of the 49% who receive a higher interest rate instead.

What’s an APR?

APR stands for annual percentage rate and is used to explain the yearly cost of borrowing money.
As well as the interest, APR also includes any compulsory fees associated with the loan like an application fee or annual charge. It doesn’t include any discretionary fees like late payment charges and returned payment penalties.

What’s a personal or exact APR?

While the representative APR refers to the rate offered to at least 51% of people with that loan, a personal or exact APR is – as its name suggests - a lot more personal.
When you see a loan advertised with an exact APR, it typically means that will be the rate you’ll receive.
Exact APRs can be higher than the representative APR but are more accurate. This may be much more useful than a representative APR if you’re on a strict budget and want to calculate how much your car finance will really cost.
Terms and conditions can apply. Exact APRs are usually dependent on your individual financial situation and credit score. The rate may also change based on the amount you want to borrow and the length of the loan term.
It’s worth keeping in mind that you might not be able to find out your personal rate until after you’ve made an application for finance and a hard credit search has taken place. As too many hard searches in a short-term can negatively impact your credit score, you may wish to consider providers who can offer an estimated personal rate with a soft credit check instead.

What are the key differences between the different types of APR?

There are several key differences between a representative APR and a personal or exact APR:


Representative APR

Personal/Exact APR

Is tailored to your circumstances



Must appear on financial promotions



Requires a hard credit check



Includes any admin charges



*Some lenders will offer a Personal/Exact APR with only a soft credit check required. However they will require a hard credit check to be conducted if you complete your application to take out credit.

How do I find out what my rate is?

You’ll only be able to find out the exact rate you’ll be offered once you’ve applied for car finance and undergone a hard credit check to thoroughly assess your credit history and ensure you can afford to comfortably repay the loan amount.

However, if you’d like to get an idea of the APR you might get, there are alternative options that won’t affect your credit score.

Speaking of credit scores, that’s a great place to start. If you have no idea whether your credit score is good, bad, or somewhere in between, applying for car finance can feel like a shot in the dark. The more you know about your score before looking for a loan, the more you can do to improve your chances of securing a better personal APR..

There are three credit reference agencies in the UK, and each calculates your credit score differently. The good news is that you can check your score with all of them for free:

  • Equifax – free score available at ClearScore
  • Experian – free score available from Experian itself
  • TransUnion – free score available from Credit Karma

Once you know where you stand, you can look to compare car finance quotes.

A comparison site or finance broker with pre-approval could help you explore your options. These companies often work with a panel of lenders and can run a soft credit check – with no impact on your credit score – to find out whether you’ll be eligible for a loan.

This pre-approval isn’t a guarantee that you’ll be accepted but can offer some extra reassurance before agreeing to a hard credit search.

FAQs About Representative APR

What’s a good APR?

There’s no set figure that makes one APR good and another bad.
The APR that’s best for you will depend on your personal financial circumstances and how much you believe you can comfortably afford to borrow. Typically, this will be the lowest rate that you’re eligible for as this represents the cheapest way for you to borrow money.
It’s all relative. For example, someone with an excellent credit score may consider an APR of 17% to be bad, but this might be the best available offer for someone who has a spotty payment history and a credit score that could do with a little TLC.
APR isn’t the only thing to consider when deciding which car finance loan to take. The loan term, monthly payment amount, and terms and conditions (e.g., any annual mileage restrictions) should all ideally fit with your priorities, driving habits, and budget.

Can I get a good interest rate with bad credit?

Whether you’ve missed payments in the past, had a debt management solution like an IVA or CCJ, or never had any types of credit before, there are many reasons why you might have bad credit.
Bad credit doesn’t have to prevent you from getting car finance, but it might impact the interest rate you’re offered. While it’s unlikely that the lowest APRs will be available to you, you may still qualify for a loan that falls within your budget.

How can I secure the best interest rate?

In the short-term, don’t be afraid to shop around. While you should be wary of the number of applications for finance you make that involve a hard credit search, a comparison site or finance broker can check your eligibility with a panel of different lenders at the same time. This allows you to compare the loans available to you and their APRs.
Every car finance provider should also have their representative APR prominently displayed on their adverts. While there’s no guarantee you’ll receive this rate, it can be a good indicator of the kind of APR most customers are able to secure.
In the longer-term, taking steps to improve your credit score can help you secure the best possible interest rate.

How can I improve my exact APR?

Your exact APR can be affected by a range of factors, but one of the most important is your credit score. The good news is that credit scores aren’t fixed, and you can take steps to improve yours over time including:
·      Making payments on time
·      Registering on the electoral roll
·      Keep credit utilisation percentage low
·      Avoiding having too many hard searches on your credit file in a short time