What APR is too high for a car?

Asked by: Prof. Edwin Hills  |  Last update: December 26, 2022
Score: 4.6/5 (69 votes)

A high APR (“annual percentage rate”) car loan is one that charges higher-than-average interest rates. The legal limit for car loans is around 16% APR, but you will find lenders that get away with charging rates of 25% or more.

Is 20 percent APR high for a car?

A 20% APR is not good for auto loans. APRs on auto loans tend to range from around 4% to 10%, depending on whether you buy new or used.

Is 12% APR too high?

A low credit card APR for someone with excellent credit might be 12%, while a good APR for someone with so-so credit could be in the high teens. If “good” means best available, it will be around 12% for credit card debt and around 3.5% for a 30-year mortgage.

How much car APR is too much?

Car loan interest rates should not exceed 25%. But because car loan rates vary, what might be too much interest on a car loan for one person might actually be a very low rate for another. Car loan APRs range from 0% to 25% or higher since they are largely determined by your credit score.

Is 15% APR for a car high?

A 15% APR on a car loan is astronomically high. At this level, most financial experts would agree that your money and time are better spent fixing your credit than adding more debt in the form of a car loan.

I Have a 24% Interest Rate On My Car Loan!

17 related questions found

Can you negotiate APR on a car?

Yes, just like the price of the vehicle, the interest rate is negotiable. The first rate for the loan the dealer offers you may not be the lowest rate you qualify for. With dealer-arranged financing, the dealer collects information from you and forwards that information to one or more prospective auto lenders.

How can I lower my APR on my car loan?

How to lower APR on a car loan
  1. Check your credit reports and build credit. ...
  2. Apply for refinancing. ...
  3. Apply with a co-borrower or add a cosigner. ...
  4. Shop around. ...
  5. Think about shorter loan terms. ...
  6. Negotiate APR and interest rate. ...
  7. See if you can lower your APR in just a few minutes.

What is a good APR on a 2022 car?

McBride warns that rates are expected to drift higher in the next year, predicting that by the end of 2022 the average interest rate on a five-year new car loan will be 4.4 percent and the average rate for a four-year used car loan will be 4.85 percent.

Is 11% a high APR?

A credit card APR below 10% is definitely good, but you may have to go to a local bank or credit union to find it. The Federal Reserve tracks credit card interest rates, and an APR below the average would also be considered good.

Is 2.9% APR good for a car?

If you're buying a new car at an interest rate of 2.9% APR, you may be getting a bad deal. However, whether or not this is the best rate possible will depend on factors like market conditions, your credit background, and what type of manufacturer car incentives there are at a given point in time on the car you want.

Is 10% APR good on a car?

A 10% APR is not good for auto loans. APRs on auto loans tend to range from around 4% to 10%, depending on whether you buy new or used.

Is 16% APR high for a car?

A high APR (“annual percentage rate”) car loan is one that charges higher-than-average interest rates. The legal limit for car loans is around 16% APR, but you will find lenders that get away with charging rates of 25% or more.

Is 17 interest rate high for a car?

A 17% interest rate is high for people with credit scores in the 700s. But remember that a credit score isn't the only determinant of your rate. Other factors include: Debt-to-income ratio.

Why is my APR so high with good credit?

In finance, generally the more risk you take, the better potential payoff you expect. For banks and other card issuers, credit cards are decidedly risky because lots of people pay late or don't pay at all. So issuers charge high interest rates to compensate for that risk.

Why are car finance rates so high?

So if you're experiencing high car loan interest rates, the steepness of the rate is more than likely the result of low income, too much debt, low credit, or a combination thereof. Lenders base their car loan rates on a variety of factors, including: Credit score and credit history. Income.

Is it smart to finance a car for 72 months?

Because of the high interest rates and risk of going upside down, most experts agree that a 72-month loan isn't an ideal choice. Experts recommend that borrowers take out a shorter loan. And for an optimal interest rate, a loan term fewer than 60 months is a better way to go.

Can you pay off a 72 month car loan early?

Some lenders charge a penalty for paying off a car loan early. The lender makes money from the interest you pay on your loan each month. Repaying a loan early usually means you won't pay any more interest, but there could be an early prepayment fee.

Is 5 years car loan too long?

They are trying to get a good interest rate and a reasonable monthly payment. But a five-year loan often has a monthly payment that is too high for them, and they end up financing for a longer term even if it costs them more down the line, Zabritski said.

Can APR be lowered?

It is possible to request a lower credit card APR. Before your issuer will grant one, they'll often consider a few factors: Your credit history, score, and risk. Your payment history.

Do dealerships make money on interest rates?

What the dealer negotiates with lenders is the interest rate they pay, not what the end user, or car buyer, pays. This provides the dealership an opportunity to mark up the interest rate ultimately offered to the client and make money off of financing.

Is 6.99 APR good for a car loan?

For used vehicles, the average interest rate can range from 3.61% APR with Super Prime to 19.87% for Deep Subprime. If you can get a rate under 6% for a used car, this is likely to be considered a good APR.

How do car dealerships determine APR?

The amount of interest you may pay can vary a lot since the APR is determined based on a variety of factors. Among others, these factors typically include credit history, amount financed, length of the term, age of collateral, vehicle, and the down payment. The better your credit, the lower the interest rate.