Financing a vehicle can be a confusing process, especially if you’re not quite sure what to expect. Sufficient knowledge of car and finance terms will help you out a great deal when you’re shopping for a new vehicle. You may have heard the term “APR” when negotiating a deal on a new or used car or truck.
Short for Annual Percentage Rate, something like APR can easily stand in the way between you and acquiring your dream car. The term stands for the amount of interest on your loan that you will pay annually, which can vary greatly, depending on factors like your credit score. Agree to a too-high amount, and you won’t be able to make your payments. Worse than not qualifying for a car loan, is having your car repossessed after a missed payment. Don’t fall into the trap!
Fixed vs. Variable
Typically, you’ll encounter two types of APR when auto financing. Fixed rate financing, for instance, means that your interest rate will remain the same for the entirety of your loan. With this, you’ll be able to determine your monthly payments, as well as how much you’ll pay in interest over the life of your loan. With variable rate financing, your interest rate may change over time. This will be based on the prime rate, or the “index”. It may go up or down over time, which will alter the amount of your monthly payments. Pay close attention to what type of interest rate you are agreeing to. This will ensure no surprises once that first vehicle payment becomes due.
Hoping to finance a new or used vehicle? Our Payne Auto Group financing department can help! Visit us at one of our valley-wide dealerships for more information about how you can lease or purchase one of our stunning new Chevy, Ford, GMC, Dodge or Mitsubishi models.