Understanding APR for a car loan | Chase – Chase News & Stories

We don’t support this browser version anymore. Using an updated version will help protect your accounts and provide a better experience. 
Update your browser
Please update your browser.
We don’t support this browser version anymore. Using an updated version will help protect your accounts and provide a better experience.
Update your browser
Sign in
Free credit score
Financial Education
Customer Service
Give feedback
Schedule a meeting
Find ATM & branch
It appears your web browser is not using JavaScript. Without it, some pages won’t work properly. Please adjust the settings in your browser to make sure JavaScript is turned on.

When it comes time to finance a new or pre-owned car, several terms are important to understand. One such concept is the annual percentage rate, or APR. The APR expresses the total cost of borrowing which may differ among lenders based on how they set their rates, and the fees they charge. Your credit score and the amount you borrow will also affect the APR on your loan.  Learn the APR meaning for car loans and how to use this information when purchasing your next vehicle. 

When reviewing financing details and picking a lender, it’s important to compare APRs. According to the Consumer Financial Protection Bureau (CFPB), an auto loan’s interest rate is the cost you pay each year to borrow money expressed as a percentage. The interest rate does not reflect fees charged for the loan. The APR is the cost you pay each year to borrow money, including certain fees, such as origination fees, expressed as an annual rate.
Unless you’re paying cash for your new automobile, a car loan will likely be necessary. But a loan comes with a cost, as lenders charge interest on money borrowed.  A loan’s APR reflects the interest charged by a lender, but it also takes into account certain fees associated with the loan.  These fees are called “prepaid finance charges” and may vary widely between lenders, so watch for them. 
One good example of a prepaid finance charge is an “origination fee” which some lenders may charge to cover costs associated with underwriting their loans, and/or to simply increase their fee income.  This fee could be a lot or a little or may not be charged at all.  Such fees are factored into the APR so you can compare the true, total cost of borrowing between different lenders.
Although low interest rates can be attractive to car buyers, the APR is the number to look at because it gives you the actual amount your financing will cost if you make all payments as scheduled. Using the APR to understand your costs is more accurate than using an interest rate and can help you in your car buying decision. 
The APR for a new car loan for someone with excellent credit can be substantially lower than for someone who has poor credit.  Moreover, extra fees from your lender or dealership can increase your APR significantly. If you choose to finance these charges as part of your car loan, they’ll cost you even more in the long run. Since rates and fees can vary widely, it’s essential to understand interest rates and APR.
Lenders calculate interest rates on an individual basis, meaning there isn’t a fixed rate used for everyone. Instead, your lender looks at various factors to determine your interest rate, then adds any fees or prepaid expenses to compute your APR. Before providing loan documents and rates, lenders may consider: 
If there are no prepaid finance charges involved in your loan, your APR and interest rate are the same.  Your APR is higher than an interest rate when certain fees are applied. Ask your dealer or lender to show you an itemization of your prepaid finance charges and their effect on your APR, as compared to your interest rate.  Your APR is the true cost of borrowing.
Prequalification is an excellent way to find out if you’re able to get a loan and what your estimated costs may be. 
You can also ask your dealer or lender about the fees and APR associated with the loan you’re interested in.  Then before you sign on the dotted line, carefully review your Truth in Lending (TIL) disclosure, required by the federal Truth in Lending Act (TILA).  This document requires lenders to provide consumers with loan details, such as your annual percentage rate and itemization of amount financed, before the borrower signs a loan agreement. The APR information must be disclosed very clearly on your loan documents, and dealers and lenders can answer any questions you have regarding your costs or payments. 
Financing a car is a big deal, and it can feel overwhelming. Fortunately, many resources exist to help you navigate buying and financing a vehicle. If you’re ready to shop for or finance a car, check out the Chase Auto site. You can find details about financing, maintaining your vehicle, and much more. 

This article is for educational purposes only and provides general auto information.  The material is not intended to provide legal, tax, or financial advice or to indicate the availability or suitability of any JPMorgan Chase Bank, N.A. product or service.  Outlooks and past performance are not guarantees of future results. Chase is not responsible for, and does not provide or endorse third party products, services or other content. For specific advice about your circumstances, you may wish to consult a qualified professional.
Choose the checking account that works best for you. See our Chase Total Checking® offer for new customers. Make purchases with your debit card, and bank from almost anywhere by phone, tablet or computer and more than 16,000 ATMs and more than 4,700 branches.
It’s never too early to begin saving. Open a savings account or open a Certificate of Deposit (see interest rates) and start saving your money.
Choose from our Chase credit cards to help you buy what you need. Many offer rewards that can be redeemed for cash back, or for rewards at companies like Disney, Marriott, Hyatt, United or Southwest Airlines. We can help you find the credit card that matches your lifestyle. Plus, get your free credit score!
Get a mortgage or refinance your home with Chase. See today’s mortgage rates, figure out what you can afford with our mortgage calculator before applying for a mortgage.
You might be able to use a portion of your home’s value to spruce it up or pay other bills with a Home Equity Line of Credit. To find out if you may be eligible for a HELOC, use our HELOC calculator and other resources before you apply.
Chase Auto is here to help you get the right car. Apply for auto financing on a new or used car with Chase. Use the payment calculator to estimate monthly payments.

“Chase,” “JPMorgan,” “JPMorgan Chase,” the JPMorgan Chase logo and the Octagon Symbol are trademarks of JPMorgan Chase Bank, N.A.  JPMorgan Chase Bank, N.A. is a wholly-owned subsidiary of JPMorgan Chase & Co.
"Chase Private Client" is the brand name for a banking and investment product and service offering, requiring a Chase Private Client Checking℠ account.
Investing involves market risk, including possible loss of principal, and there is no guarantee that investment objectives will be achieved. Past performance is not a guarantee of future results.
J.P. Morgan Wealth Management is a business of JPMorgan Chase & Co., which offers investment products and services through J.P. Morgan Securities LLC (JPMS), a registered broker-dealer and investment adviser, member FINRA and SIPC. Insurance products are made available through Chase Insurance Agency, Inc. (CIA), a licensed insurance agency, doing business as Chase Insurance Agency Services, Inc. in Florida. Certain custody and other services are provided by JPMorgan Chase Bank, N.A. (JPMCB). JPMS, CIA and JPMCB are affiliated companies under the common control of JPMorgan Chase & Co. Products not available in all states.

© 2022 JPMorgan Chase & Co.
Chase’s website and/or mobile terms, privacy and security policies don’t apply to the site or app you’re about to visit. Please review its terms, privacy and security policies to see how they apply to you. Chase isn’t responsible for (and doesn’t provide) any products, services or content at this third-party site or app, except for products and services that explicitly carry the Chase name.


Leave a Comment