How To Negotiate APR On Car Loan?: (Do’s & Don’ts) You Need To Know

  • Post author:
  • Post category:Blog / Car Deals
  • Reading time:23 mins read
Negotiate apr on a car loan

Are you considering buying a new car but are wondering whether you can negotiate apr on a car loan? If yes, then you have come to the right place. Vehicles are becoming a necessity with each passing year. 

Many people want to buy one, but with high loan interest rates, their dream is still a dream. But to ensure your dream does convert into reality, we are here to guide you and help you every step of the way.

Purchasing a vehicle is a lengthy process and requires financing in most scenarios. And if you are not careful while taking a loan, you might pay more than you anticipated. Thus you need to negotiate the terms of your car loan to get the best purchasing deal.

What Is APR?

If you are new to taking a loan, then there are a few things that you must know before you proceed with it. An APR is one such crucial thing that every borrower should know about.

APR refers to the Annual Percentage Rate. It is the cost you will pay to the lender every year for borrowing money. APR is most expressed in percentage and includes the interest rate on a loan and the certain fees associated with it.

One interesting fact about APR is that it does not consider compounding. Knowing APR for the loan will let you know the final number they can expect on your loan. With the help of APR, you can compare different loan providers and find the best one for yourself.

Key Pointers of APR:

  • APR calculates what percentage of the principal amount you will have to pay each year, taking monthly payments and transaction & other fees into account.
  • A financial institution or a lender must disclose the APR for a loan before the agreement is signed.
  • Knowing APR will let you know whether a loan is right for you.
  • The APR does not always reflect the actual cost of borrowing, as lenders have a certain amount of flexibility in calculating it.

Types Of Bank Loans APRs You Should Know

Bank loans come with two types of APRs. One is fixed APR, and the other is variable APR. The fixed APR loan guarantees that the interest will not change during the loan period. In contrast, the variable APR loan comes with an interest rate that may change at any time during the loan duration.

The APR rates are highly affected by the credit score of the borrower. The borrower with excellent credit is likely to get significantly lower rates than those with poor credit.

Know About Disadvantages Of APR

Knowing APR for your loan is crucial as it gives you an idea of how much you will have to pay yearly to clear off your loan. However, you should not depend on it greatly, as the APR is only sometimes an accurate measure of the total amount you will be borrowing.

Experts say that it may understate the actual cost of the loan. It is because the calculations generally assume the loan repayment period will be long. For a loan that will take longer to repay, the costs and fees are distributed in small amounts throughout the period with the APR calculations.

For example, the APR for a loan for a particular amount for 30 years will be lower than that for a loan of the same amount for ten years.

Also, APR causes trouble as the interest rate is assumed constant while calculating it. It sure considers rate caps, but the final numbers you get are formed on fixed rates.

Furthermore, there are other charges or fees like appraisals, credit reports, titles, applications, life insurance, late fees, attorneys & notaries, and more, which the lender deliberately excludes.

Thus, without these charges, the APR might seem right to you, but as soon as your loan period begins, you will have to pay for these fees, and your repaying amount will be more than you wanted.

So, to be a smart shopper, while asking for quotes and comparing different offers, check which APR has the fees mentioned above included in it. And to be more thorough, calculate APR yourself using the nominal interest rate and other cost expenses.

How Can I Negotiate Apr On A Car Loan Successfully?

If you have been holding back from purchasing a new vehicle because you think it is impossible to negotiate on one, then it is time you get the facts right.

Negotiation is omnipotent when it comes to taking out a loan. The only thing that makes a difference is whether you have the qualities as a buyer that allow you to negotiate.

It is easy for anybody, whether super rich or a common person, to negotiate their terms while taking a loan. The only thing that ensures their success is if they have all the things that the creditor or lender asks for.

If you want to ensure you get the best deal on your new car loan, below we have some smart tips you need to follow. Each tip is associated with one crucial factor. If you have all of them in your pocket, you will save much money on your car loan.

– Check Your Credit Score

A crucial factor that decides your loan’s interest rate is your credit score. Thus it is important you keep a close eye on it. Your credit score will tell you where you stand and whether you are eligible for a lower interest rate.

Generally, the credit score between

  • 300 to 579 is considered POOR
  • 580 to 669 is considered FAIR
  • 670 to 739 is considered GOOD
  • 740 to 799 is considered VERY GOOD
  • 800 to 850 is considered EXCEPTIONAL

If your credit score is exceptional or very good, you hold power to negotiate your way with the lender and are more likely to get lower interest rates.

Suggestion: Maximize Efficiency and Safety: A Deep Dive into the 9 Best Tires for Your Tesla Model.

The credit score with the rating of good also holds some options to negotiate but anything lower than that, and you have no official right to negotiate your loan terms.

– Know Your Affordability Level

One of car buyers’ biggest and most common mistakes is that they get swayed by a model and do not consider its affordability. Thus, research a car well before you finalize it well. Compare MSRP, Invoice Price, and Fair Market Price.

Take the invoice price as your bottom line. Any car you purchase should cost you between MSRP and invoice price. Do not go for a vehicle you can not afford, as you won’t only be spending that much.

How much car you can afford will affect your other payments like the loan, auto insurance, and more. And the costlier your car, the more you ought to pay to cover it well.

– Research Dealerships

Research different dealerships properly to ensure you get the best rates and good deals on your car. Visit the dealerships in person, look at what other people say about them online, and ask around.

Stay away from dealerships with bad reputations. Also, make sure you inquire about the dealership fees of different firms before you begin looking for a ride.

– Ask For Quotes

Buying a vehicle is an expensive event. Thus it would be best if you did not rush into things. One of the best ways to ensure you get the best price on your purchase is to shop around.

Once you have settled on which model you want to buy down to its every last detail, visit different dealerships and ask for quote prices. After this, compare prices from different dealerships and choose the one that seems the best.

– Negotiate The Car Price

The most common mistake that almost every buyer makes is focusing on buying the car and the various features they can add to it. As a buyer, you have the right to negotiate the buying price for the car.

Related: Dominate the Streets: Upgrade Your Ride with these 7 High-Performance Street Racing Tires.

If you are a desirable customer, the dealership is more likely to offer you a lower selling price. The lower your buying price, the lower your loan amount, and you can easily work on getting lower interest rates.

– Lose The Unnecessary Add-ons

The less money you spend on buying your car, the less you will have to lend to buy it. Thus, it is better to go for a car within your affordable price range. Also, fill up your ride with the necessary add-ons only.

If you can survive without that 12-speaker system, satellite radio, and other top features, then do not add them to your purchase.

The costlier the extra feature, the higher the price it will add to your car, the bigger the loan you will have to take, and the higher the interest rate.

– Look For Auto Loans Yourself

When you buy a car from a dealership, they will usually offer to help you find the best car loan for your purchase. For once, it might seem a great idea as the dealership does all the work on your behalf. 

However, it does not guarantee the best interest rates because, most of the time, the dealerships get compensation from lenders if they refer you to them.

Don’t Miss To Checkout: Protect Your Car Against Moisture Damage: A Review of the 9 Best Car Moisture Absorbers.

Thus, it is better to look for a car loan independently before going to a dealership. This way, you can compare the rates you have for yourself and the ones the dealership offers.

You can negotiate easily for similar rates if you have the better one. And if not, you can always go for the auto loan you found rather than the one offered by the dealership.

– Make A Bigger Downpayment

One thing that all the car dealers like the most are the upfront payments. They always prefer a buyer paying the full price of a car over one paying credit or via loan.

To successfully negotiate your way on the apr for a car loan, try to make a large down payment. This way you will have less price to pay.

The lesser money you borrow, the lesser interest you can get. So, if you were thinking can you negotiate apr on a car by making a large upfront payment for your car, the answer is yes.

– Try To Go For Shorter Loan Repayment Term

The longer it will take to repay your loan, the more interest you pay. Try to settle for a shorter loan term along with your lower interest rates.

Suggestion: Choosing the Perfect Bike Rack for Your Hatchback: Our Top 7 Picks!

However, understand that a lower repayment term means a hefty monthly payment.  So decide well if you can afford large monthly payments or not. If yes, then go for it. And if not, you have to stick to the period offered by the loan lender.

– Get A Cosigner

If you have a poor credit score but still want to buy a car, find yourself a credit-worthy cosigner to apply for the loan with you. A cosigner is a person with an impressive credit score who agrees to lend you their good credit rating and make loan payments if you cannot do so.

Also Read: Top 10 Cheapest Sports Cars To Consider: Best Affordable Sports Cars.

Assurance from a person with excellent credit history assures the lender and reduces the risk of default. But you should know that the loan you took will also show up on your cosigner’s credit report. So, if you default or create a payment problem, you will hurt your credit score and theirs.

4 Less-Known Ways To Reduce The Interest Rates After You Get The Loan

If you want to negotiate apr on a car loan, you must be as sharp and quick as your lender. Financial institutions charge interest on borrowed money to compensate for the risk they take while lending money to others.

The riskier the borrower, the more compensation the lender desires, and vice versa. So, if you want to decrease the interest rate of your auto loan, you need to reduce your risk factors as a borrower.

Similar Post: Explore The Best Mazda CX 90 With Expert Review On Price, Specs, & More.

Sometimes, you will not qualify and not get the rate of interest you desire. But do not get disheartened, as you can reduce your interest rate for your remaining loan term if you boost your credit score.

Below are the four ways you can implement and improve your overall creditworthiness:

1. Check Your Credit Report Daily

You should maintain a habit of checking your credit score regularly. Your credit reports hold the details of all your current & previous credit accounts of yours with all the information you need.

With this, you can easily analyze which areas are your best & worst and where you need to pay more attention.

2. Do Not Miss The Payments

No matter what happens or what you do, you should ensure that you make your credit payment on time and that too every time.

Also Read: Beginner’s Guide To How To Stop Getting Rust On The Car Frames (Easy Method).

If you are behind on payments with any of your credit accounts, try to clear them as soon as possible. Making payments on time boosts your credibility, while missing it kills it.

3. Do Not Be Afraid Away To File A Dispute

Suppose you find inaccurate or fraudulent information showing up on your credit report. In that case, it is a matter of concern as it can kill your credit score.

The best way to handle it is to file a dispute with the credit reporting agencies to either have the details corrected or removed.

4. Pay Down The Credit Card Balances

Your credit utilization ratio (total card balances divided by total credit limit) is crucial in making or breaking your credit score.

It basically tells how much is your credit card debt. The lower the utilization ratio, the better. So, if you have credit card debts, start working on paying them off and ensure you keep them low in the future.

Top FAQs About How To Get Low Interest Rate On Car

Can I negotiate APR on a car loan?

YES. You can negotiate car prices, monthly payments, and interest rates without feeling shy, scared, or ashamed.

Usually, dealerships offer you the rate that you qualify for in general. But if you have a good credit score, will pay the hefty down payment, and have done your research well, you can negotiate your way to get the APR you desire.

What is the good APR percentage for an auto loan in the US?

If you think about the good APR for your car loan, then you must know the value is different for a brand new car and a used car.

In the US, average car loan rates are around 5.07% for a brand-new car and about 5.32% for a used car.

But this rate increase as your credit score decreases.

What is the lowest APR for a vehicle in 2023?

As the new year is here, you can expect to pay less for your car loan than the last time.

In the United States, the current average interest rate for brand cars is around 4% and for used cars is around 8.67%.

So, if you want to buy a car, right now is the ideal time.

Will the interest rates for loans decrease in 2023?

If you are thinking of buying a car, house, or any other thing by taking a loan, then you need to know that 2023 will be a costly year.

The interest rates on mortgages, vehicles, and credit cards will only get expensive this year.

Should I take a car loan of five years or ten years?

Before taking a loan, you should know that there are both perks & downsides to longer & shorter loan periods.

The longer the term, the lower the interest rate, but you will pay more interest.

On the contrary, a loan for a shorter term will have you pay low overall interest, but the monthly payments will be high.

So, if you consider a ten-year loan, you will pay a higher interest rate than a five-year loan but will have lower monthly payments.


If you want the best rates on your next car loan, you need to learn how to negotiate apr on a car loan. Negotiation will help you get your dream car at a price acceptable to you and not burn a hole in your pocket.

We hope this guide helps you negotiate your way to your dream car in 2023.


Ritambra is an absolute car fanatic who loves the ultimate Porsche 911. It is her dream car she wishes to own someday. She has over four years of experience in automotive writing. She loves to explore new car launches, different car accessories, latest automobile technologies, find out the best purchases, and where can fellow car fanatics find the best buying deals. With her skillful writing and in-depth knowledge of the automotive industry, you will learn about the latest automotive trends, news, launches, car reviews, top automobile comparisons, car maintenance, usage advice, and more. Her writing is delightful, informative, and entertaining, even for casual readers. You will fall in love with cars with Ritambra's writing and unshakable passion for them.

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.