What Exactly is an APR: Auto Finance Terms 101

Auto finance is a dense subject full of strange sounding terms. Here at Koons Woodbridge Buick GMC, we pride ourselves on demystifying every aspect of the car buying process, especially auto finance terms. Take APR, for example.

The Annual Percentage Rate

There is a common misconception that an APR is an interest rate, the interest you pay on your auto loan. However, the APR is actually a number expressed as a percentage that includes the interest rate on your loan. Similar to the interest rate, the APR is a charge that you pay for the perk of borrowing money. The APR also includes a whole schedule of additional fees that you pay just to get the loan.

Buy Rate, APR When you apply for dealer-coordinated financing, a potential lender quotes a unique interest rate called a buy rate. As mentioned above, this interest rate eventually becomes part of the APR. Since different lenders may quote different buy rates, your final APR may vary according to your particular lender’s buy rate.

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