Car Loan Rate Basics

Annual Percentage Rate (APR): The Annual Percentage Rate (APR) is a yearly rate of interest that includes all of the fees and expenses paid to acquire the loan. Federal law requires lenders to disclose the APR. The APR is essentially the ONLY rate you will need to compare one loan (of the same length) with another.

Interest Rate: Interest is the annual rate of return that the lender receives on the principal of the loan. The interest rate is relevant t to the lender while the APR is relevant to the borrower.

Down payment: The down payment is the total amount of money the borrower puts down towards the purchase of a vehicle at the time of purchase and origination of the loan. This does NOT include any credits for trade equity or rebates and incentives. NOTE: The down payment is credited to reduce the final sales price of the vehicle AFTER it has been adjusted to reflect taxes, trade inequity or other expenses.

Loan Term: The length of the loan in months. A longer loan leads to substantially more interest and frequently, a trade inequity if the vehicle is traded in during the first three years.

Principal: The amount of the auto loan without the interest factored in. In other words, the amount you are financing.