How to Reduce APR on a Car Loan

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 6.9% APR. Representative APR 13.9%

Evolution Funding Ltd T/A My Car Credit

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 13.9%, annual interest rate (fixed) 13.85%, 47 monthly payments of £201.38 followed by 1 payment of £211.38 (incl. estimated £10 option to purchase fee), a deposit of £0.00, total cost of credit is £2,176.24, total amount payable is £9,676.24.

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.

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!

Car Finance APR: What Does it Mean?

Man signing a car finance deal

You need to buy a car but don’t have the money. Thankfully, your bank balance doesn’t mean you have to forfeit one of life’s main necessities. Car finance is on hand to provide the resources you require to own a vehicle.

Most people understand what the process entails, whether it’s opting for a hire purchase or a lease purchase with balloon payment. However, APR is something you’ll come across when searching for car finance and you might not know what it means. What is car finance APR? Keep reading to find out.

What is car finance APR?

The simplest way to understand APR is to view it as interest. The acronym stands for Annual Percentage Rate, and it’s the amount added on in interest yearly. It also includes any compulsory charges. APR continues to be included within your repayments deal until the deal is over and you either give the car back or own it outright.

How does it work?

APR works in the same way that most interest rates work. In terms of car finance, the dealership you choose will use a standard measure to calculate the amount of interest you need to pay. The higher the rate, the more you’ll pay back in the long-term.

What Can APR Affect?

Car finance APR mainly impacts how much you will pay over the course of a contract. The figure isn’t taken into account within the deal as it’s added on afterwards. Therefore, it’s essential to figure how much it is and whether you can afford it before signing on the dotted line.

Finance APR is a good indicator of offers as you can use the rate to compare quotes with other dealers on the market. For example, if everything is the same except for the APR, you could save a significant sum.

My Car Credit’s finance calculator

At My Car Credit, we recognise the need to be transparent, which is why we have a loan calculator tool you can use free of charge. If you ever wonder, ‘can I get car finance?’ you don’t need to wait too long to find out!

Of course, you can always contact a team member and discuss your options with them directly.

Rates from 6.9% APR. Representative APR 13.9%

Evolution Funding Ltd T/A My Car Credit

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 13.9%, annual interest rate (fixed) 13.85%, 47 monthly payments of £201.38 followed by 1 payment of £211.38 (incl. estimated £10 option to purchase fee), a deposit of £0.00, total cost of credit is £2,176.24, total amount payable is £9,676.24.

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.

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!

Why You Should Steer Clear of Low Rate Car Finance Promises

Frustrated lady on laptop trying to find low rate car finance

Buying a brand-new or used car is often a serious investment. It can be tempting to offset costs by opting for a car finance agreement that guarantees astonishingly low interest rates.

However, when something sounds too good to be true, it usually is! In reality, finance companies can't promise low rate car finance for all applicants. This is because they’re calculated based on individual credit scores and circumstances.

How are interest rates calculated?

So, shiny promises aside, how is car finance interest calculated? The outcome depends on many variables, including a person’s credit history, income, desired vehicle model and deposit. 

Without a doubt, a person’s credit score is the most significant factor. This is a rating everyone has based on their financial history. This rating helps lenders to determine potential risk, interest rates and credit limits. It’s used to gauge someone’s trustworthiness and likelihood to pay back instalments. A good credit score increases your chances of securing a lower interest rate and overall monthly repayments. 

However, at My Car Credit, we understand that unforeseen circumstances can impact a person’s credit rating through no fault of their own. This is why we’re open to accepting applications from people with less than perfect financial backgrounds.

If you’d like to improve your chances of securing finance, there are plenty of simple ways to bolster your rating and generate more favourable interest rates before applying.

We can help you find the best possible interest rates

Whilst we would never promise you a low interest rate, we are in a great position to find you the best deal on car finance for your circumstances. We have the largest panel of lenders out of any UK car finance broker. This gives us the best chance of matching you to a lender with the most desirable interest rates. 

To start your journey, speak to one of our knowledgeable team members by calling 01246 458 810 or emailing enquiries@mycarcredit.co.uk

Rates from 6.9% APR. Representative APR 13.9%

Evolution Funding Ltd T/A My Car Credit

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 13.9%, annual interest rate (fixed) 13.85%, 47 monthly payments of £201.38 followed by 1 payment of £211.38 (incl. estimated £10 option to purchase fee), a deposit of £0.00, total cost of credit is £2,176.24, total amount payable is £9,676.24.

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.

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!

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 6.9% APR. Representative APR 13.9%

Evolution Funding Ltd T/A My Car Credit

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 13.9%, annual interest rate (fixed) 13.85%, 47 monthly payments of £201.38 followed by 1 payment of £211.38 (incl. estimated £10 option to purchase fee), a deposit of £0.00, total cost of credit is £2,176.24, total amount payable is £9,676.24.

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.

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!