Brits are no strangers to car loans, with the latest statistics revealing around two million cars are purchased on finance every year. With so many benefits on offer, it’s no surprise so many British motorists embrace car loans.

As the APR has to be disclosed prior to the signing of any paperwork, you can look around and get a car finance quote that outlines the APR you’ll likely be paying. By implementing the seven steps below, you may be able to either reduce APR on a car loan, or find a deal that feels more manageable for your circumstances.

7 steps to reduce APR on a car loan

1.    Improve your credit score

Your credit score is one of the most significant determiners of your APR. If you’ve missed previous payments, your score will be lower, and your APR is consequently going to be higher.

Essentially, the higher your credit score, the more likely you are to qualify for a low APR. If you don’t immediately need to purchase a new vehicle, it might be worth waiting whilst you build your credit score up over time.

2.    Apply with a co-signer

If you do have a poor credit score but need a vehicle immediately, you’re more likely to secure a low APR if you apply with a guarantor with strong credit. This essentially spreads the risk of the loan out, which makes you more attractive to a lender.

A guarantor is responsible for repaying any missed payments – or even to pay the loan back in full should the circumstances require it. Bear in mind also that any missed payments by you will show up on their credit score.

Being a guarantor is a huge responsibility and so it is important that both you and your guarantor understand what is involved before going ahead.

3.    Go for a shorter repayment term and don’t borrow too little

Shorter repayment terms will typically have lower interest rates. You’ll end up paying more with your monthly repayments, but the APR overall will be lower. Similarly, don’t go for a loan of only a few thousand pounds. Because these smaller loans are paid off far quicker, they’ll tend to have higher interest rates. It’s a far better idea to wait and save up the amount that you need than taking a low loan with a high APR on it.

4.    Choose a cheaper car

It’s pretty simple – if you borrow less money, your APR will be lower. You may feel that you want the expensive car with all the add-ons, but this might mean that you’re having to borrow serious amounts of money. Your monthly repayments will consequently be higher, and so will your APR.

Look for a cheaper vehicle and take out a smaller car finance loan. Consider, too, whether you might get a better finance deal on a new car than on a used car. This might seem contrary but used cars will have higher mileage and more wear and tear, which makes them more vulnerable to breakdown. These are all factored in by lenders when they propose an APR.

5.    Pay out for a larger down payment

If you’re willing to put down cash for a larger down payment, you pose less risk to a lender. As a result, you’re likely to have a lower APR. You’ll also pay less overall because you won’t be borrowing so much.

6.    Refinance your car

Depending on the terms of your car finance, you may be able to refinance your vehicle partway through the agreement. If you refinance your car, you’ll typically apply to a new lender, who will pay off your existing loan and replace it with a new one. This new one may have a lower APR, and might also have lower monthly repayments, depending on what you’re able to negotiate.

7.    Prepare to negotiate and shop around

Depending on the lender you’re looking at, you may be able to negotiate to lower the APR. Many will show you pre-approved rates, meaning there might be the potential to reach an alternative agreement.

Alternatively, it’s in your best interest to shop around. Take the time to investigate different deals offered from different lenders and find one that works for you.

Get a quote today

If you’re shopping around for car finance, don’t forget to use My Car Credit’s car finance calculator. Since we look for the best deal from our large panel of lenders, we may be able to reduce APR on a car loan compared to other car finance companies. What’s more, we’ll only ever do a soft credit check when calculating a quote for your car finance needs. As such, you can get a better idea of how much it will cost without increasing your APR in the long run!

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!