what is APR? finance a used car in Indianapolis

What Does APR Mean When Buying a Car?

When you finance a used car, one of the most important concepts you should understand is APR – the annual percentage rate. It shows the total cost of your future borrowing. APR differs depending on the amount you borrow, the lenders’ rates and fees, your credit score, and other factors. 

We have prepared this APR FAQ to help you understand why APR is essential when financing your car in Indianapolis. Read on to feel more confident and start your financing process with Indy Auto Man, a reliable Indianapolis dealership.

The average used car loan rate is 8.66%, according to Experian’s data from the second quarter of 2021. In general, your interest rate may be anywhere from 4% to 20% for a used car. If you managed to get a rate under 8%, it can be considered a good APR for a car loan. 

APR vs. Interest Rate: What the Car Loan Really Cost?

  • Interest rate is the annual loan cost expressed in percentage. Your monthly payment is based on the interest rate on the promissory note. 
  • APR is the annual loan cost, including all charges and fees, such as insurance,  loan origination fees, closing costs, etc. APR is also expressed in percentage. APR gives you more realistic information about what you will have to pay. 

Does 0 APR Mean no Interest?

A zero APR means that a lender is not charging any fees or interest on the loan. Unfortunately, lenders offer 0% APR rarely if ever, and only for new or certified pre-owned cars.

 

How to Protect Yourself During the What-Ifs

When you finance a car, a good idea is to get GAP insurance. This way, you will be financially protected in case of your vehicle is stolen or totaled in an accident, even if the unpaid principal balance due on the loan is not covered by the insurance settlement amount.

How to Get a Car Loan with a Low APR

get a car loan in Indianapolis with a low apr

If you are going to finance a used vehicle, the only way to find a car loan with a low APR is to get pre-approvals from different lenders.  Such offers are usually valid for 30 days, and you will have plenty of time to make the decision. 

If you are not impressed with the offers you received, you can do the following :  

  • Add a cosigner. If you have somebody among your friends or relatives with a good credit history, you may ask this person to cosign your loan. This way, you will “borrow” the credit scores and may get a lower rate. Note, that your cosigner will be responsible for the debt if you default on your loan, and this will negatively impact his or her credit score. 
  • Increase your down payment. The lenders are more likely to offer a lower interest rate if you pose less risk to them. At our dealership, you may complement your down payment with a trade-in
  • Car loan length matters. Despite many lenders offering appealing monthly payments for a longer repayment term, your total payment will be less if you won’t spread your payments, so try to shorten the repayment term. 

Used Car Financing in Indianapolis

At Indy Auto Man car dealership, we always strive to provide our customers with the most advantageous car financing in Indianapolis. We have a partnership with 24 banks and credit unions to guarantee the best rates for your loan. 

Lock your rate, have your time, shop around and return to buy a used car at Indy Auto Man!