If you’re looking to purchase a vehicle, understanding financial terms can go a long way towards making sure you get the best ride for your budget. A word that you will frequently see during the car-buying process is APR. To help you better understand APR, we’ve put together this guide.
APR stands for Annual Percentage Rate. This figure shows you how much you will be charged for borrowing from a lender. It’s usually expressed as a percentage, illustrating the actual yearly costs of funds over the time you’re paying back your loan. This rate includes fees and additional costs associated with the loan, allowing you to better understand if a prospective vehicle will fit well into your monthly budget. APR also enables you to compare multiple loans, finding the right one for your financial needs.
Many people think that APR and interest rates are the same thing, but that’s not the case. Your interest rate can actually affect your APR. Other factors that change APR include transaction fees, late penalties, and more. That’s why, when considering what loan is best, you should look at both the interest rate and APR.
If you’re borrowing from a lender, you want to make sure you know how much you’re going to receive and have to pay back. That’s why APR is important. If you have a lower APR on your loan, then this will likely affect the affordability of your car in a positive way; it means that you will spend less money on your new vehicle over time. To stay on budget, you should consider avoiding debt with a high APR, though sometimes your credit score can affect the type of APR you will receive.
Our finance team at Hardin County Honda will work to help you find the right loan for your next vehicle. If you have any questions, come visit us in Elizabethtown, KY.