What Is a Good APR for a Car Loan? | GetJerry.com (2024)

In most cases, 2% is a very good APR, but this rate is usually only accessible to people with good credit.

APR stands for annual percentage rate. It refers to the percentage of the loan amount that you’ll be charged each year to finance the loan, often known simply as the interest rate.

Not only that—Jerry can help you save on your car loan. This intelligent, AI-based app is the fastest, most accurate way to comparison shop for loan options—and you won’t have to spend time making calls.

The most important factor impacting APR is your credit score. Great credit scores mean that you can access low interest rates. If you have poor credit, you’ll probably be offered a higher APR.

This is because people with low credit scores are seen as more likely to miss payments and default on a loan. If that happens, the lender will repossess your vehicle and try to sell it. But lenders risk losing money during this process, so they charge you a higher interest rate in order to mitigate this risk.

You can improve your credit score by paying your debts on time. In some cases, having a cosigner for your loan can also help give your score a boost.

A quick guide to credit scores:

Newer cars tend to offer a lower APR. The make, model, and year of the car also factor into the APR since they affect resale value.

Longer loan terms are considered higher risk and often come with higher interest rates. While the typical loan term ranges from two to five years, some are available for much longer.

Here are some examples of APR by credit score and type of loan:

It all comes down to reliability. Used cars are considered less reliable than new cars. High mileage, multiple owners, and wear and tear contribute to an increased risk of breakdown. And if the vehicle breaks down, then you may not continue to make payments on the loan.

But it’s important to consider the big picture. You could break even or save money in the long term with a used car. Used cars are usually less expensive than new cars—so while a used car might mean a higher interest rate, you’ll generally need a smaller loan that takes less time to pay back.

The length of the loan affects the interest rate, too. Older cars usually aren’t eligible for long-term loans, while newer cars with long loan terms typically have higher interest rates.

The rates from banks tend to be good, and from credit unions, the rates are even better. Some dealerships will finance their own loans, too. Here are some APR ranges from top lenders in the country:

Some lenders have restrictions on the types of loans they will approve. For example, CapitalOne does not approve loans for vehicles older than 2006. Make sure you check with your lending institution if you have a particular vehicle in mind.

In less than a minute, the Jerry app compares quotes from over 45 different providers and gives you three affordable options. When you’re ready to purchase, Jerry takes care of all the paperwork and even cancels your old policy. And did we mention that the comparison shopping is always free?

To save money, look for a shorter term loan with a low APR. While your monthly payments may be higher, you’ll spend less time making payments so less interest will accrue. In the end, more money will go towards the principal rather than interest.

A higher APR, even over a short loan term, can add up to hundreds or thousands of dollars in interest. Simply put, a lower APR means you spend less money overall while repaying your car loan.

Here’s an example:

If you take out a loan for $30,000 with a 5% APR and a 5-year loan term, you’ll pay $3,968 in interest over the life of your loan. In comparison, a higher APR of 20% for the same loan term would accrue $17,688 in interest. The lower APR results in savings of about $14,000!

A low APR can save you thousands of dollars over the term of your loan. That means that you aren’t just shopping for a car, you’re shopping for a loan.

Comparison shopping is the best way to ensure you’re getting the most favorable loan terms, including a low APR. Start your search about a month before you’re ready to buy. You’ll have two weeks after your first pre-approval application to submit more applications. You shouldn't submit more after two weeks, or you'll get more hard checks on your account that will drop your credit score.

If you’re having trouble finding loans with a low APR, you may need to step back and improve your credit score. You may also want to look for a shorter loan term or reduce the total loan amount by increasing your down payment.

And to ensure you always have the lowest rate, Jerry will send you new quotes every time your policy comes up for renewal—so you’re always getting the coverage you want at the best price.

Jerry is your one-stop shop for auto loan refinancing.

The lower your APR, the better, but you won't be able to get a really low APR without good credit. Anything over 10% APR on a car loan is pretty high. If you have excellent credit, you should be shooting for 5% APR, good credit 6-7%, fair credit 11-12%, and bad credit 16-17%.

For a car loan, 24% APR is terrible. However, 24% APR on a credit card is a bit more reasonable.

Getting low APR on your car loan is critical since cars are expensive. The higher your APR, the more likely it is that you end up upside-down on your loan.