Shopping for an auto loan or for auto refinancing? You’ll need a low car loan interest rate for the best results – here’s how to find it!
One of the most important things that determine how much money you pay on your car loan is the interest rate or APR. There are a lot of complex calculations that go into finalizing every individual’s interest rate. However, that does not mean you cannot influence it and ensure you get a low APR – because who wants to lose money on high car payments, right?
All you need is to do a few things right – the best APR for you is hidden in plain sight! In this post, we’ll break down everything you can do to improve your financial awareness and lower your car loan APR.
What Does APR Mean?
The Annual Percentage Rate (APR) or Car Loan Interest Rate is the cost of borrowing a certain amount of money from a lender to purchase a vehicle, including fees and interest charges.
When you approach a lender for a car loan, the actual amount you need is called the Principal. In return for loaning you the money, you need to pay the lender a certain interest charge on the principal every month. The amount of interest is based on the APR, which is a more accurate reflection of your monthly payments.
How Is My APR Decided?
The APR on your car loan is decided by taking into account several factors like:
- Credit score: Typically, a score above 660 is considered good. Lower scores will result in higher APRs – some as high as 20-30%.
- Payment history: If you have a history of erratic payments and financial irregularities, lenders may consider you a risk, and APRs could increase.
- Loan Amount: You may not be loaning the entire cost price of the vehicle. Making a downpayment on the loan or trading in your old vehicle can reduce the amount you may need to borrow.
- Loan-to-value ratio: It is the amount of the loan you’re hoping to borrow divided by the value of the car.
- Loan term: You could choose a longer loan term to bring down the APR, but you may pay more in interest charges.
- Other fees: The cost of origination fees and processing fees are included in the APR.
You can also easily check what car loan interest rate will give you affordable monthly payments by using an online auto loan interest rate calculator.
What APR Is Too High for a Car?
The interest rate you pay on your refinance car loan depends on your credit score, payment history, and many other factors. Nevertheless, there’s are an average APR that is optimal for each credit score – check them out in the table below.
| Credit Score | New Car Loan APR | Used Car Loan APR | Refinance Car Loan APR |
| 750 or higher | 6.33% | 6.58% | 3.38% |
| 700-749 | 10.64% | 10.89% | 4.32% |
| 600-699 | 14.27% | 14.52% | 6.74% |
| 451-599 | 17.52% | 17.77% | 9.39% |
| 450 or lower | Not Applicable (N/A) | N/A | N/A |
*As of February 2022
How to Lower Your Car Loan Interest Rate
Who doesn’t want to save on monthly payments by snagging a low APR? Follow these guidelines before and during the loan or refinance process to get the lowest APR possible for you.
1. Maintain a good credit score
2. Apply for Auto refinancing
3. Shop around and Compare Auto refinance rates
4. Apply with a co-borrower or add a co-signer
5. Negotiate the APR with the lender
6. Think about shorter loan terms
How Can I Lower My Car Loan Interest Rate with Way.com?
Aren’t you just tired of hopping from place to place searching for the best loans and rates? If you’d rather just go online and shop around for the best auto refinance loans in a few clicks, Way.com can help you do that. We’re working to make car ownership affordable to millions of Americans through our bundled car services like parking, auto insurance, car wash, refinance, and more.
Simply head over to the Way.com Refinance section and use the auto loan calculator to find out how much you can save. Then, compare offers from several of our partners and choose the refinance offer that most appeals to you.
Can I Lower My Current Car Interest Rate without Refinancing?
Unfortunately, there is no easy way to lower your current car loan APR without refinancing. The only other way you can do so is by either renegotiating your loan or paying off your loan. Both of these options have very low chances of success because it depends on the outlook of the lender.
Renegotiating a car loan with the dealer might be hard because he might already have sold it to another financial investor. Paying off your loan is also a very expensive scenario if you don’t have the required amount ready with you.
Should I Pay Off My Car Loan Early?
It’s possible to pay off your loan early, and we’d highly recommend you do so if you can afford it. However, check with your refinance lender if there are any additional charges or pre-payment penalties for clearing the loan early.
Read more blogs for info on finding top-rated airport parking, the best parking spots in your city, and affordable car washes near you.
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