Representative APR and exact APR in car finance (a quick and simple guide)

dog on bed whilst woman obtains exact apr on car finance

Shopping for a car can kick up a whole new world of car finance lingo, which can become overwhelming! Terms such as interest rates, APR, Representative APR, real rates, exact APRs can leave your head in a jumble as to what it all means. We’ve summarized below what you need to know in a quick and simple guide which should leave you seeing the wood for the trees when it comes to car finance jargon.

What is an interest rate?

An interest rate is the cost each year of borrowing an amount of money. It is expressed as a percentage of the total amount borrowed.

For example, if you borrow £1000 and you are charged a 10% interest rate, you’ll pay an additional £100 on top of the original £1000, so £1100 in total.

What is an APR?

‘APR’ stands for Annual Percentage Rate. This starts with the annual interest rate and also takes into account any additional fees, charges and final payments. The APR shows you the total cost of a finance deal – the higher the APR, the more you pay back over the life of the loan.

APRs help you compare finance products accurately on a like-for-like basis. The FCA (Financial Conduct Authority) requires all lenders and brokers (including car dealers) to state the APR of any financial deal on offer.

When shopping around, always compare one APR with another, along with the total amount you’ll pay back.

What is a representative APR?

The representative APR is often used to promote a financial offer, and is used to show the cost of credit for the majority of borrowers. It is calculated as the rate that is offered to at least 51% of customers.

The representative APR is important because it means that nearly half of customers will be given a rate more than the representative APR. This is especially true where you have poor or bad credit. However, those with an excellent or good credit rating will usually be given a better rate than the representative APR.

The important thing to remember is that not all customers are eligible for a lender’s best rate of interest, and so the representative APR is a better indication of what you could be offered if you don’t have a perfect credit file.

What is an exact APR?

An exact APR takes into consideration your personal circumstances, your credit profile and financial history, and your current financial situation. It is therefore an accurate calculation of the total amount you will pay back.

The exact APR is sometimes called a ‘personal APR’ or ‘real rate’ since it is tailored to you and your circumstances.

The lender will perform a credit check (or credit search) to calculate an exact APR. The healthier your credit score and credit history, the less risk for the lender, and the lower your exact APR.

With My Car Credit, we start every car finance application process off with a soft search, which means that no mark is left on your credit file. Wherever possible, we give you an exact APR using soft search. This means you can obtain a ‘real rate’ quote on car finance from My Car Credit without worrying about it showing up on your credit history.

How can I calculate car finance?

Even knowing what all of this car finance jargon means, it can still be very complex to calculate car finance. This is why we have a free Car Finance Calculator, which you can use to work out your typical APR (dependent on whether your credit score is excellent, good, fair, poor, or bad), your monthly repayments, your total cost of credit, and the total amount payable over the term.

Try using our Car Finance Calculator. Alternatively, you can search for a quality used car from our approved dealers, and calculate finance on a specific vehicle. It’s as easy as that!

We hope this has helped you understand the world of car finance a little bit better, and if you need any help or advice, our Car Credit Specialists are here to help!

Rates from 9.9% APR. Representative APR 10.9%

Evolution Funding Ltd T/A My Car Credit

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My Credit Rating

Excellent

  • 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

Good

  • 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

Fair

  • 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

Poor

  • 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

Bad

  • 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
£X

Typical rate

Loan amount

Total payable

X% APR*

£X

£X

*for illustration purposes only

No impact on your credit score*

Representative Example

Borrowing £7,500 at a representative APR of 10.9%, annual interest rate (fixed) 10.87%, 47 monthly payments of £191.50 followed by 1 payment of £201.50 (incl. estimated £10 option to purchase fee), a deposit of £0.00, total cost of credit is £1,702, total amount payable £9,202.

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.
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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!

Email
or call 01246 458 810

Smart Tips for Financing Your Next Car

Woman wearing sunglasses thinking about financing next car

The world of car finance can be confusing. This often leads people to make simple mistakes which can cost them lots of money. Don't worry – we're here to give you a few smart tips to making financing your next car a doddle.

Understand your credit score

This is the first thing you need to do before you get car finance. Unlike other loan deals (e.g. mortgages, credit cards) you’re more likely (but not guaranteed!) to get a car loan regardless of your credit score. This is because the lender knows they can always redeem their investment by taking the car. However, this means that you may be willing to accept the first offer a car lender gives you. Normally, car finance will advertise their best interest rate but when you read the finer details, this only applies to customers with good credit scores.

A better indication of interest rate is the representative APR. This is the rate that the majority of borrowers will get (at least 51% of customers).

Conducting a credit score check can give you a better idea of what rate to expect. Many car finance websites have free calculators. These allow you to work out your expected interest rate using your credit score.

Keep the term as short as you can afford

Put simply: the shorter, the better. When you look into finance options you may be tempted to take a long-term contract with fantastically small monthly repayments. However, in almost all cases this isn’t a good option. Essentially, the longer the term is on your contract, the more interest you’ll pay overall. So, whilst it might be cheaper in an immediate sense, you’ll end up paying more. We recommend keeping the term as short as you can afford, but without impacting on your quality of life.

Pay for extras upfront

Most car finance deals come with additional costs. These can include registration fees, documentation fees, as well as any other additional extras you want like extended warranties. These are all normal parts of a loan agreement and are nothing to worry about. However, try to pay them in cash. Adding extras onto your loan increases your monthly repayments and you’ll likely have to pay interest on it.

If you’re looking to finance your car the right way, you should start by conducting a soft search with My Car Credit. Our approach is a great way of finding out about your credit score and the car finance options available to you without affecting your credit profile. We’re ready to help you on your journey to a great car with a great finance plan.

Rates from 9.9% APR. Representative APR 10.9%

Evolution Funding Ltd T/A My Car Credit

Return to Car Finance Options
Return to search

Related articles

What is Hire Purchase? – Simple HP Explanation

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Car Finance Declined: 5 Possible Causes

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Is It Hard to Get Car Finance?

Read More
My Credit Rating

Excellent

  • 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

Good

  • 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

Fair

  • 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

Poor

  • 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

Bad

  • 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
£X

Typical rate

Loan amount

Total payable

X% APR*

£X

£X

*for illustration purposes only

No impact on your credit score*

Representative Example

Borrowing £7,500 at a representative APR of 10.9%, annual interest rate (fixed) 10.87%, 47 monthly payments of £191.50 followed by 1 payment of £201.50 (incl. estimated £10 option to purchase fee), a deposit of £0.00, total cost of credit is £1,702, total amount payable £9,202.

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.
Reviews icon
Trustpilot logo with five green stars indicating a 5-star customer rating.

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!

Email
or call 01246 458 810

Buy Don’t Lease: The Benefits of Owning a Car

couple sat next to each other enjoying the benefits of owning a car

Having a car is a vital part of modern life. A lot of us drive daily and rely on our vehicles to do almost everything. In recent years, leasing has become a popular way of obtaining a car, but is it any better than buying or financing your next car? What are the benefits of owning a car? Here are our two cents on the debate.

Leasing a car

You can think of leasing like renting – you make monthly payments which give you use of the car until you are ready to give the car back.

Pros

  • You get newer models of a car that you might not be able to buy otherwise.
  • You make smaller repayments than when you buy a car.
  • You can change the car you drive (hassle-free) every few years.
  • You get tax advantages if the car is being driven for business purposes.

Cons

  • There are mileage restrictions that form part of your lease contract if exceeded these will incur an additional fee.
  • You end up paying more than what the car is worth, as you lease it during a period of rapid depreciation.
  • You are committed to completing the whole length of the loan.
  • You must return the vehicle in showroom condition – that means no alterations and no accidental stains or scuffs. Any changes will incur an additional fee.
  • Your car insurance will be higher.

Leasing is a good option for those that aren’t concerned about owning a car but would prefer to drive a new model every few years.

Buying a car

Buying a car is where you purchase a vehicle outright without any agreement or contract in place.

Pros

  • You can make any changes to the model (aesthetic or mechanic) that you see fit.
  • In the long run, it is the cheapest way to buy a car.
  • There are no mileage restrictions.
  • The car is a financial asset and you can sell it at any time.
  • Owning a car gives you the freedom to do what you want with it.

Cons

  • You have less protection than the consumer rights that come with a finance agreement.
  • You must pay a lump sum for the car in one go.
  • Your car loses value as it depreciates, losing around 60% of its value in the first three years.

Put simply, buying a car is a good option for those that can afford it and want the freedoms that come with upfront ownership.

Financing a car

Financing the purchase of your car is a great way of getting ownership of the vehicle without making one lump sum payment.

Pros

  • Financing allows you to spread the cost of a car and make affordable monthly payments throughout your agreement.
  • Making regular monthly repayments on a finance agreement is a great way to improve your credit score and prove your financial responsibility.
  • You have the option of owning your car at the end of your agreement.

Cons

  • The monthly payment can be higher than a lease option.
  • You can end up paying more than what the car is worth if you take on the wrong finance option.
  • Some finance agreements have restrictions on how you can use the vehicle.

There is no right and wrong when it comes to getting a car. We understand that it depends on any number of individual circumstances. Leasing is an affordable option for those that aren’t concerned with owning their vehicle. Buying outright requires the upfront cash but it does give you outright ownership and allows you the most freedom. Financing is a great option for people that want to own their vehicle but don’t want to make one large payment. If you’re looking at potential finance options for your next vehicle, why not get in touch with our team here at My Car Credit – our specialist advisors would love to hear from you.

Rates from 9.9% APR. Representative APR 10.9%

Evolution Funding Ltd T/A My Car Credit

Return to Car Finance Options
Return to search

Related articles

What is Hire Purchase? – Simple HP Explanation

Read More

Car Finance Declined: 5 Possible Causes

Read More

Is It Hard to Get Car Finance?

Read More
My Credit Rating

Excellent

  • 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

Good

  • 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

Fair

  • 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

Poor

  • 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

Bad

  • 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
£X

Typical rate

Loan amount

Total payable

X% APR*

£X

£X

*for illustration purposes only

No impact on your credit score*

Representative Example

Borrowing £7,500 at a representative APR of 10.9%, annual interest rate (fixed) 10.87%, 47 monthly payments of £191.50 followed by 1 payment of £201.50 (incl. estimated £10 option to purchase fee), a deposit of £0.00, total cost of credit is £1,702, total amount payable £9,202.

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.
Reviews icon
Trustpilot logo with five green stars indicating a 5-star customer rating.

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!

Email
or call 01246 458 810