Annual Percentage Rate (APR) is one of the most important factors to consider when calculating the total cost of your car loan. Whether you’re shopping for a peppy Volkswagen Golf, an eco-friendly Mini Electric or a luxurious Audi A1, understanding the intricacies of car loan APR is critical when it comes to making smart and informed financial decisions.

In this comprehensive guide, we’ll take a deep dive into APR, explain how it affects your car loan repayments, and provide handy tips on how to unlock the best deals.

Understanding car loan APR

APR stands for Annual Percentage Rate and reflects the total borrowing costs associated with the loan. It includes the interest rate you’ll pay on cash borrowed, as well as additional fees and charges imposed by the lender. The goal is to provide borrowers with a clear idea of the total cost of the loan, including fees. This transparency makes car loan APR one of the most important metrics to consider when crunching your numbers and calculating how much to borrow.

Is APR the same as interest rate?

While car loan APR does factor in interest charged on the cash amount borrowed, it also includes other fees and charges associated with the loan. This makes it a different and more comprehensive metric than a traditional cash interest rate.

Why is APR important?

Car loan APR is one of the best ways to compare loan offers quickly, easily and accurately from different lenders. As mentioned above, APR not only factors in the cash interest rate but includes additional fees and charges. It offers borrowers a glance at the total cost of the loan, expressed using an easy-to-interpret percentage rate. A low APR means you’ll pay less in interest and additional fees over the lifetime of the loan. A high APR means you’ll pay more.

What is a typical APR rate?

In the UK, a typical car loan APR rate offered by a reputable lender should sit at around 10.9% for an applicant with excellent credit. It’s important to understand that most reputable brokers and lenders use representative APR as an example. The actual percentage will vary depending on the applicant. We’ll cover representative APR in more detail below.

Fixed vs variable APR

Most auto loans in the UK come with fixed APR. This means the APR remains constant for the lifetime of the loan and monthly payments stay the same. For borrowers, this provides stability and makes it easy to budget and plan ahead. Car loans with variable APR are less common and can be difficult to manage.

Factors that can influence car loan APR

APR can vary significantly depending on the applicant. Here are a few factors that can influence what APR you’re eligible for:

Personal credit score

Your personal credit score can have a big impact on what car loan APR you are offered. Lenders use your score to assess your credibility as a borrower and calculate risk. Borrowers with high credit scores are generally rewarded with lower APR, and vice versa.

Preferred loan term

The total length of your car loan can affect your APR. Lenders typically offer lower APR for shorter loan terms. Longer terms can result in higher overall APR, though monthly payments are lower which appeals to many borrowers.

Loan amount

The total amount borrowed is another factor that can influence APR. To lower your car loan APR, consider putting together as much cash as possible for your down payment.

What is representative APR?

When researching car loans, you’ll see the term representative APR used by brokers and lenders. This is the rate that at least 51% of customers will receive. Of course, some customers will enjoy lower rates while others will receive higher rates.

Representative APR takes this fluctuation into account and offers borrowers a general idea of what to expect. Ultimately, it’s a transparent way to compare rates offered by different brokers or lenders. The bottom line? Use representative APR as a guide, not a guarantee.

How do I find out the exact APR of a car loan?

You’ll need to continue with your application to get an exact car loan APR quote. Also called a ‘real’ or ‘personal’ rate, the figure is tailored to match your unique credit profile, financial history and personal circumstances.

Ideally, brokers should be able to calculate an exact car loan APR using a soft search. This type of search doesn’t leave a permanent mark on your financial history and won’t affect your credit score or future applications.

Tips for lowering your APR

APR can have a big impact on the total cost of your car loan. So, it makes sense to be proactive when it comes to lowering your APR. Here are some strategies to help you secure the best rates:

Boost your credit score

From paying off outstanding debts to registering on the electoral role, there are a few quick and easy ways to boost your credit score.

Increase your down payment

A larger down payment can reduce the amount you need to borrow, which can help bring down your car loan APR.

Choose a shorter repayment term

While it can be tempting to stretch out your loan for as long as possible to bring down your monthly payments, opting for a shorter repayment term typically reduces APR. In the long run, you’ll pay less.

Score the best APR with My Car Credit

One of the best ways to secure a good car loan APR is to work with an experienced broker. At My Car Credit, we specialise in helping Brits secure finance on all kinds of cars, from zippy Ford Fiestas to adventure-ready Range Rovers. Whatever your budget, financial history or credit score, we can help you unlock the best possible APR from trusted lenders.

Use our handy car finance calculator to get the ball rolling, or get in touch with a friendly member of the My Car Credit team today to find out more.

Rates from 9.9% APR. Representative APR 12.4%

Evolution Funding Ltd T/A My Car Credit

My Credit Rating


  • You are a home owner
  • You have been on the electoral role for a long period of time
  • You have current credit arrangements and mortgage with no defaults
  • You have no CCJs, credit arrears or missed payments
  • You rarely apply for credit
  • You are employed or self-employed


  • You are on the electoral role
  • You are a home owner or long standing tenant
  • You have a stable employment history
  • You have current credit arrangements with occasional missed payments
  • You have no CCJs


  • You are or have recently been on the electoral role
  • You may have recently changed address
  • You may have occasional missed payments
  • You may have an old CCJ
  • You may have regularly applied for credit


  • You may have had frequent changes in address
  • You may not be traceable on the voters roll
  • You may have exceeded credit card limits
  • You may have missed payments on current agreements
  • You may have had a CCJ in the past


  • You may not be traceable on the voters roll
  • Your credit cards are over their limits
  • You have recent CCJs
  • You may have been refused credit elsewhere
  • You may be in a debt management plan

X monthly repayments of

Typical rate

Loan amount

Total payable




*for illustration purposes only

No impact on your credit score*

Representative Example

Borrowing £7,500 at a representative APR of 12.4%, annual interest rate (fixed) 12.36%, 47 monthly payments of £196.44 followed by 1 payment of £206.44 (incl. estimated £10 option to purchase fee), a deposit of £0.00, total cost of credit is £1,939.12, total amount payable is £9,439.12.

Evolution Funding Limited, trading as My Car Credit, is a credit broker and not a lender.

Please ensure you can afford the repayments for the duration of the loan before entering into a credit agreement.

*Initial application is a soft search. Should you progress, some lenders may perform a hard search on your credit file.

Require more help?

Got a question you can’t find the answer to, or need some advice and guidance around taking out car finance? Our Car Credit Specialists are friendly, experienced, and here to help so get in touch today!