When financing your new vehicle purchase, many people often overlook the small details. You've seen and heard the acronym "APR," but perhaps you didn't give it much thought when taking out a loan. APR stands for annual percentage rate and plays a big role in your monthly payment and total amount paid throughout the life of the loan. At Mildenberger Motors, we are the #1 dealer of Buick, Cadillac, Chevy, and GMC. But we also make it our mission to bring you these great vehicles at an equally great price and deal. Continue reading below to learn more about how the APR of your loan impacts the amount you can expect to pay.
How Does the APR Affect My Monthly Payment?
Quite simply, the higher the APR, the higher your monthly payment will be. Some people might not think 1% or 2% will have much of an impact, but this is simply untrue as the total amount of the loan increases. For example, if you choose to finance $30,000 on your new vehicle and have a 60-month loan at 4% APR, you will pay $552/month. But, if you finance that same amount for the same 60 months but have a 6% APR, you will now pay $580. This extra $28/month also means you will pay an extra $1,680 in total!
How Can I Avoid Paying More If I Have a Rocky Credit Score and Am Offered a High APR?
The simplest way is to put down a larger down payment. Some lenders may offer a lower APR in this case. But, even if not, your total amount financed will be lower, and the interest paid will also be lower. Another thing you can choose to do is opt for a shorter-term loan, which will result in a higher monthly payment, but you will save big on interest in the long term.
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