To Buy Used Car or Instant Car Loan approvals,   +91 9900037613

What is the Average APR for Car Loans?

When it comes to financing a new car, understanding the Average Annual Percentage Rate (APR) for car loans is important. If you are buying a car for the first time, getting the best deal on your auto loan can save you a significant amount of money in the long run. 

APR for Car Loans?

Understanding What is the Average APR for Car Loans

APR stands for Annual Percentage Rate, and it represents the true cost of borrowing money, including both the interest rate and any additional fees. In essence, it provides a more accurate picture of the total cost of your loan over its entire term.

It is important to have a basic idea of what the average APR for car loans is. This knowledge will empower you to negotiate effectively with lenders and secure a favorable rate. Keep in mind that these averages can fluctuate over time due to economic conditions and market trends.

How is APR Calculated?

APR for car loans is calculated using the following formula:

APR = (Total Interest and Fees / Loan Amount) / No. of days in Loan Term) x 365 x 100)

In this formula:

  • Total Interest and Fees includes all interest charges and fees associated with the loan.

  • Loan Amount is the total amount you’re borrowing for your car purchase.

  • Loan Term is the duration of your car loan in days (e.g., 36 months = 1,080 days).

This formula helps lenders determine the annual cost of borrowing, enabling borrowers to compare offers effectively.

Factors Influencing APR on a Car Loan:

Several factors come into play when determining the APR for a car loan. It is essential to understand that they can vary significantly from one lender to another. Here are some key factors:

  1. Credit Score: Your credit score is one of the most influential factors affecting your car loan APR. Lenders use it to gauge your creditworthiness and risk level. Generally, the higher your credit score, the lower your APR is likely to be. Again, a lower credit score may result in a higher APR.
  2. Loan Term: The duration of your car loan, often referred to as the loan term, can impact your APR. Short-term loans, typically three to five years, often come with lower APRs because they pose less risk to lenders. However, longer-term loans, such as those spanning seven years, may have higher APRs.
  3. Down Payment: Providing a substantial down payment upfront can positively influence your APR. Lenders view a larger down payment as a sign of financial stability, reducing the risk they assume. Consequently, they may offer you a lower APR in return.
  4. Type of Vehicle: The type of vehicle you’re financing can also affect your APR. Generally, new cars tend to have lower APRs than used cars. Lenders perceive new cars as less risky investments due to their lower likelihood of needing costly repairs.
  5. Economic Conditions: Economic conditions can impact car loan APRs on a broader scale. During economic downturns, interest rates may be lower to stimulate borrowing, potentially resulting in more favorable APRs for car buyers.


Remember, a good APR can save you money, reduce your financial stress, and provide you with the confidence to drive your dream car with pride. So, as you set out on this exciting journey, use this knowledge as your trusty companion. With each step you take, you’re one step closer to realizing your automotive dreams.

At ApnaCar, we believe that everyone deserves the opportunity to own their dream car, and we’re here to make that dream a reality.

Leave a Reply

Your email address will not be published. Required fields are marked *