When you see television commercials for cars or hear people talk about auto financing, you will hear the term "APR" thrown around a lot. The term "APR" stands for "annual percentage rate," or the annual rate of charge, and refers to the yearly interest rate on loan, rather than simply monthly interest. In auto loans, APR is most affected by a person's credit score. Before you visit us at Max Madsen's Aurora Mitsubishi, learn more about APR and how it can affect your auto loan.

Our dealership is located here in Aurora, IL, proudly serving the greater Naperville and Downers Grove areas.

Aiming for Low APR

Ideally, you will want your APR to be as low as possible when applying for an auto loan. Even as you pay off the loan and the total balance goes down, APR can still impact how much you will pay over time. A low APR on a shorter loan term will mean less interest will accrue in the short term. Ideally, an auto loan term lasting 2-5 years, at low APR, will be less expensive and result in a less additional interest as you continue to pay off the loan.

To enjoy a lower APR, you will need to have a good credit score of around 700-850. On average, a buyer with an excellent credit score (750-850) can finance a new car at 4.93 percent APR or a used car at 5.18 percent APR. Customers of subprime (450-650) or deep subprime (449-less) credit scores might have to pay more than 25 percent APR for new or used cars.

Vehicle Age and APR

You might think to yourself, "What does a vehicle's condition have to do with APR?" New cars often have lower interest rates because there is a general expectation that they will last longer. Today's used cars come built to last; banks and lenders tend to see than as less reliable overall. If the vehicle has lived past ten years and has high odometer mileage, it might prove even more difficult to get it approved for a loan overall.

That said, one can finance a used car for a shorter loan term and still save money in the long run, even if the interest rate is at a slightly higher rate than a new car. Our bargain used cars each cost less than $20,000, so you will find paying them off much easier and quicker, even with a higher APR.

Start Your Deal Today

Whether you choose a new Mitsubishi or a used car, you can use the handy payment calculator when starting your deal to set your own desired interest rate. Applying online for financing allows us to get a baseline assessment of your credit and decide if you qualify for a low APR auto loan. Start your deal today and contact us at Max Madsen's Aurora Mitsubishi with any questions you have along the way.

We look forward to working with you!

Categories: Finance