Auto financing has a great many terms associated with it, among them shoppers will often hear the phrase "APR." The term APR stands for "annual percentage rate" and refers to the yearly interest rates assigned to borrowers or provided for investors. In the case of auto financing, APR is a percentage amount that gets applied to the yearly cost of a loan, including additional fees and other costs. Let us break down for you how APR can affect your loan payments for your peace of mind.

When ready to begin, you can start the financing process online through Great Lakes Hyundai

APR and Auto Financing

When searching for an auto loan deal, drivers near Cleveland will often want to strive for a lower APR rate whenever possible. Auto loans are often provided by banks, who can assign fixed or variable APRs, the former remaining consistent throughout the loan period and the latter having the potential to change. Essentially, the APR on your loan refers to how much interest the loan will accumulate I the short-term and the long. As an example, if you financed a new Hyundai at 12 percent APR, and a total purchase price of $10,000, then your interest after one month would be an additional one percent, raising the total price to $10,100 and continuing slightly each year.

Ideally, you will want to shoot for the lowest APR possible, as this will make short-term interest rates lower and less noticeable. A used car financed with an auto loan of less than two percent will prove less costly in the short-term and, when paid off in a short period of time, will have less costly long-term payments as the loan matures.

You should also consider that the APR assigned to your loan reflects your credit. Those with past debt issues will often find themselves subjected to higher interest rates since lenders will see you as a "risky buyer." Drivers with higher credit may also choose to opt for leasing instead as these contracts only last for a short while and payments do not cover the total cost of the vehicle, thus, the interest rates will almost always be low.

What’s the Verdict?

Auto loans often prove advantageous for drivers who have had previous credit issues, as a loan paid on time will allow you to build equity and shows prospective future lenders that you are a dependable person. When applying for a loan, you should consider opting for a shorter-term contract and as low an APR as you can secure. Your short-term payments will be at a higher rate, but you will get the loan paid off quicker, with less long-term costs incurred from APR.

Contact us for Details

If you have further questions about APR or would like to start your deal, contact us today at Great lakes Hyundai and visit our finance center here in Streetsboro, OH. We proudly serve the Cleveland and Akron areas, and we look forward to working with you!

Categories: Finance