What is APR for a Car Loan?

What Is APR For a Car Loan

After finding your dream car near Bedford, Manchester, or Merrimack, the next step is paying for it. You could pay for it in cash. However, taking out a loan may work with your budget a little better.
There are several parts to a loan, one of them being the annual percentage rate or APR. Below, we’ll tell you exactly what APR is for a car loan. Then, if you have any questions while reading, feel free to contact the finance experts at Ira Lexus of Manchester.


APR is the effective interest rate that you pay on an auto loan. There are a couple of ways you could calculate this rate.

You could first see what your monthly payments would be by using the following items for the equation:

• Length of loan in months
• Principal
• Interest rate

You could easily plug these numbers into a payment calculator to get that monthly amount. Then, to determine APR, you’d factor in that monthly payment as well as replace the principal with the amount financed (which doesn’t include prepaid finance charges). Again, a payment calculator will help you find the APR easily.


We mentioned both APR and interest rate because they’re listed as separated entities on a loan.

Interest rate is the lower of the two numbers and represents the cost of borrowing each year. This doesn’t include any fees or interest accrued to the day of your first payment, as it’s just the cost of borrowing money.

APR, meanwhile, is the higher of the two rates and represents the total cost of financing a vehicle each year. This number does include fees as well as interest accrued to the day of your first payment.

Although these rates signify different things, they’ll actually give you the same monthly payments. They’ll also lead you to pay the same amount for your automobile in the long run. The reason they’re shown separately is simply to help you understand your loan better.


Having a specific APR could affect how much you’re paying both per month and for the length of the loan.

Therefore, there are certain tips you could follow to get a lower APR and possibly save on your auto loan.

One thing you could do is to check your credit score and try to raise that, if necessary. Make sure all your bills are paid on time, keep balances on credit cards as low as possible, and only apply for credit as needed. A higher credit score could get you a lower APR, so this is always something to consider.

Another tip you could follow is to apply for a shorter loan term. Car loans can range from about 36 months to 84 months. A shorter loan could lead to lower monthly payments. However, the APR could be higher, leading you to pay more in interest over time. A longer loan could result in higher monthly payments but a lower APR. If the slightly higher monthly payments work with your budget, then that could be a good option for you.


At Ira Lexus of Manchester, we want you to feel confident through each step of your car financing journey. Therefore, we’ll be with you every step of the way, helping you get a great loan with terms that work for you.

To get started, fill out our FINANCE APPLICATION to get pre-approved. We’ll then reach out and have you driving home to Bedford, Manchester, or Merrimack in a NEW CAR in no time!