Purchasing a new vehicle can introduce you to a range of unfamiliar financial terms. One that you will likely see often during the car-buying process is APR – but what does it mean? This guide helps define APR and explain why it’s important to understand before you purchase your next Honda from Don Wessel Honda.
What is APR?
Annual Percentage Rate, frequently referred to as APR, shows you how much you will be charged when borrowing from a lender. Essentially, it tells you the exact amount getting a loan will cost you. It’s typically expressed as a percentage, showing the actual yearly costs of funds over the time you’re paying back your loan. APR includes fees and the additional costs associated with the loan, giving you a better idea of whether or not this new vehicle can fit into your monthly budget. This rate is also a handy tool to help you compare multiple loans.
Are APR and Interest Rate the Same?
There’s a common misconception that APR and your interest rate are the same thing, but it’s important to know that they are different. Your interest rate is actually just one of the factors that can affect your APR. Because of this, you should consider both your interest rate and APR when you’re deciding which loan offer to choose. Other factors include transaction fees, late penalties, and more.
Why is APR Important?
Whether or not you’re operating on a tight budget, knowing your APR is vital to understanding how much it will cost you to borrow from any given lender. Typically, a lower APR is better, since it means that you will be spending less money over time. Try to avoid deals that carry a high APR, so you can stay on budget. Don Wessel Honda will work with you to help you find a loan with a low APR for your next vehicle. Our expert financial team will help you not only find the right car for your needs, but also help you find it at the right price for your finances.
To speak with one of our experts about starting the financing process — or to learn more about how we’ll find you the best available APR—don’t hesitate to give us a call right here at Don Wessel Honda.