Whether you’re shopping for your first vehicle or a second one, it’s easy to get confused by financial terminology. Here’s a brief overview of what APR is and why it matters when securing a car loan, so you can make an informed purchasing decision.
What APR is
APR is an acronym that stands for “annual percentage rate.” In other words, it’s the interest rate expressed as a yearly rate. Think of APR as how much it will cost you to borrow money, as Credit Karma’s Lance Cothern puts it.
Types of APR
APR typically comes in just two forms: variable or fixed. As you might have guessed, a variable APR can change during the course of a loan, since it’s tied to an index interest rate. This index rate is usually the prime rate published in the Wall Street Journal.
A fixed APR, by contrast, remains constant during the loan term. This type of APR is often a better choice if you desire more predictability in terms of budgeting and knowing exactly what your loan payments will be each month.
Why APR Matters
APR is important because it determines how much interest you’ll be paying on the amount of money that you borrow. The lower the APR you secure for a loan, the less interest you’ll have to pay on it, which can help you stay within your budget instead of going over it.
How to Get the Lowest APR
There are a few ways to snag a low APR for a car loan. Having a good credit score and shopping around for the best rate are two places to start. However, here at Tipton Auto we recommend asking about our 0 percent APR incentives. Give us a call to find out more about our current financing deals to help you afford the vehicle of your dreams.