What is an APR interest rate?

An easy and transparent way to compare finance costs: all your questions answered on APR interest rates

BuyaCar team
Apr 2, 2019

What is APR?

APR stands for Annual Percentage Rate and shows the true cost of finance. It takes into account loan interest and additional fees that aren't always obvious. The higher the rate, the more you’ll pay. Lenders calculate APR using a standard method, so it’s the best way to compare quotes.

Every car finance quote should include an APR, whether you're taking out Personal Contract Purchase (PCP), Hire Purchase (HP) or Conditional Purchase finance. You won't find an APR if you're leasing a car because this ype of arrangement doesn't include interest.

Getting the lowest APR for car finance

The cost of finance depends largely on your credit score, as finance companies use this to work out the risk of lending you money.

It's based on your history of repaying credit and the stability of your position: whether you have a permanent job; own a house; or are listed on the electoral roll, for example.

Those with the highest credit score can expect the lowest APR car finance, whereas a low score will increase the rate and is likely to make 0% APR deals unavailable (see below).

Increasing the size of any deposit on your car finance can decrease the APR as well, because you'll be borrowing less money and selling the car (if you did miss repayments) would be more likely to cover the debt.


0% APR offers

No interest and no extra fees: 0% APR finance means that you only repay the amount that you borrow, so there's no penalty in taking out finance, compared with buying outright - at least on the face of it. 

In reality, many 0% APR deals aren't quite the bargain that they may seem. For example, many offers aren't available in conjunction with other discounts, including savings on the retail price or finance incentives. In this scenario, the price of the car is effectively higher, so you may be saving less than you think. In some cases, you may even pay more.

That's why it's always worth exploring all of your options and comparing the total amount payable with other finance offers, which do include interest payments.

See our list of the latest 0% APR car deals for more information.


APR on new car finance

As well as 0% APR offers, manufacturers typically offer generous discounts on new cars, so you might be offered finance at 2.9% or even 1.9% APR, which would result in you paying very little interest.

As with 0% APR deals, these may not be available in conjunction with other discounts, but every quote should include the total amount payable, so you can compare with confidence.


APR on used car finance

Without manufacturer finance incentives that are offered on new cars, you're extremely unlikely to find 0% APR finance for a used car but rates are competitive.

Some rates look extremely competitive because the interest rate is displayed prominently. But as detailed above, it's only worth comparing the APR to get a true picture of what you're paying. Rates on BuyaCar tend to start at around 7.9% APR, but will alter depending on the car that you're buying and your credit score.

Once again, any finance quote should include the total amount payable, which will also enable you to compare deals.


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