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Getting a car on finance is a great way to help spread the cost of owning your next car. When you get any form of finance or loan, you will be required to pay interest on top. If you\u2019ve never had a car loan before you may be wondering how car finance interest rates work and the factors that affect them. Our guide below explores how car finance interest rates are calculated and how you can get the cheapest car finance interest rates. Before you start applying for car finance deals, we recommend you consider the steps you can take to get the best car finance interest rate offered.<\/p>\n
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Your car finance interest rate will determine how much more you will pay. Lenders use interest rates to make money from your deal and reflect the cost of borrowing money. A low-interest rate means you will pay back less overall and can help you save money in the long run. Your car finance interest rate is added to the price of your vehicle (minus a deposit if you have one) and then divided into monthly payments.<\/p>\n
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When applying for car finance, you will come across the terms APR and interest rate, but it can be hard for many to distinguish the two. Interest rate is the cost of borrowing, and your APR or Annual Percentage Rate is the amount you will pay each year with any additional fees included in the cost. The APR is usually a more accurate projection of the total cost of borrowing and is normally higher than the interest rate offered.<\/p>\n
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[\/et_pb_text][\/et_pb_column][\/et_pb_row][et_pb_row column_structure=”1_3,2_3″ _builder_version=”4.17.3″ _module_preset=”default” global_colors_info=”{}”][et_pb_column type=”1_3″ _builder_version=”4.17.3″ _module_preset=”default” global_colors_info=”{}”][et_pb_image src=”https:\/\/www.uk-carfinance.co.uk\/wp-content\/uploads\/2022\/05\/undraw_discount_d4bd-300×179.png” alt=”apr percentage” _builder_version=”4.17.3″ _module_preset=”default” global_colors_info=”{}”][\/et_pb_image][\/et_pb_column][et_pb_column type=”2_3″ _builder_version=”4.17.3″ _module_preset=”default” global_colors_info=”{}”][et_pb_text _builder_version=”4.19.4″ _module_preset=”default” global_colors_info=”{}”]<\/p>\n
If you\u2019re looking to get a car finance agreement with the lowest interest rate possible, it can depend on a variety of factors. The rate of borrowing will be different for each individual applicant so it\u2019s hard to pinpoint a \u2018good\u2019 interest rate. At UK Car Finance, we can offer car finance from as low as 12.9% which is one of the most competitive car finance interest rates on the market. Choosing this low rate will mean you pay less than those who were offered a higher interest rate<\/a>.<\/p>\n [\/et_pb_text][\/et_pb_column][\/et_pb_row][et_pb_row _builder_version=”4.17.3″ _module_preset=”default” global_colors_info=”{}”][et_pb_column type=”4_4″ _builder_version=”4.17.3″ _module_preset=”default” global_colors_info=”{}”][et_pb_text admin_label=”Which factors affect interest rates on car finance?” _builder_version=”4.17.3″ _module_preset=”default” header_2_text_color=”#fe9125″ global_colors_info=”{}”]<\/p>\n [\/et_pb_text][et_pb_text _builder_version=”4.17.3″ _module_preset=”default” global_colors_info=”{}”]<\/p>\n There are a number of factors which can affect your car finance interest rate. These can include, your credit score, your loan term, the amount you borrow, your deposit contribution and the lender you choose. It can be confusing to know how to get the cheapest car finance interest rates possible but there are a few things you can do before you start applying. Let\u2019s take a look at how to lower your interest rate offered.\u00a0<\/p>\n [\/et_pb_text][\/et_pb_column][\/et_pb_row][et_pb_row _builder_version=”4.17.3″ _module_preset=”default” global_colors_info=”{}”][et_pb_column type=”4_4″ _builder_version=”4.17.3″ _module_preset=”default” global_colors_info=”{}”][et_pb_text admin_label=”Improve your credit score” _builder_version=”4.17.3″ _module_preset=”default” header_3_text_color=”#fe9125″ global_colors_info=”{}”]<\/p>\n [\/et_pb_text][et_pb_text _builder_version=”4.27.3″ _module_preset=”default” hover_enabled=”0″ global_colors_info=”{}” sticky_enabled=”0″]<\/p>\n Applying for car finance with good credit<\/a> can mean you may be offered a lower rate than those with bad credit. This is because you are seen as less of a risk to the lender. People who have missed payments in the past are more likely to default on their car loans. However, having a good history of meeting repayment deadlines and a low level of existing debt can help to improve your credit score and acceptance rates. You should try to increase your credit score before you start applying for car finance if possible. You can do this by reducing how much debt you have, meeting repayments on time and in full, not taking out any new credit and keeping your credit usage low. Find out how to easily improve your credit score<\/a>.\u00a0<\/p>\n [\/et_pb_text][\/et_pb_column][\/et_pb_row][et_pb_row _builder_version=”4.17.3″ _module_preset=”default” global_colors_info=”{}”][et_pb_column type=”4_4″ _builder_version=”4.17.3″ _module_preset=”default” global_colors_info=”{}”][et_pb_text admin_label=”Reduce your loan term” _builder_version=”4.17.3″ _module_preset=”default” header_3_text_color=”#fe9125″ global_colors_info=”{}”]<\/p>\n [\/et_pb_text][et_pb_text _builder_version=”4.17.3″ _module_preset=”default” global_colors_info=”{}”]<\/p>\n Car finance agreements can be spread over 1-5 years and choosing the right loan term can be key to saving money. If you choose a longer car finance term, your rate of interest won\u2019t usually change but you will pay interest for longer which means you will pay more back overall. Choosing a longer term can help to reduce your monthly payment but it may not be the most cost-effective way to borrow money. When you apply for car finance, you should try to opt for the most affordable monthly payments but with the lowest loan term possible.\u00a0<\/p>\n [\/et_pb_text][\/et_pb_column][\/et_pb_row][et_pb_row admin_label=”Row” _builder_version=”4.17.3″ _module_preset=”default” global_colors_info=”{}”][et_pb_column type=”4_4″ _builder_version=”4.17.3″ _module_preset=”default” global_colors_info=”{}”][et_pb_cta title=”Free car loan calculator” button_url=”https:\/\/www.uk-carfinance.co.uk\/car-finance\/calculator\/” button_text=”Calculate your loan” _builder_version=”4.17.3″ _module_preset=”default” background_color=”#84f1ac” custom_button=”on” button_text_color=”#84f1ac” button_bg_color=”#FFFFFF” button_border_color=”#7CDA24″ border_radii=”on|10px|10px|10px|10px” global_colors_info=”{}”]<\/p>\n Not sure how much you can borrow for car finance? Use our car finance calculator to find out. It’s completely free to use and you get an instant result!<\/p>\n [\/et_pb_cta][\/et_pb_column][\/et_pb_row][et_pb_row _builder_version=”4.17.3″ _module_preset=”default” global_colors_info=”{}”][et_pb_column type=”4_4″ _builder_version=”4.17.3″ _module_preset=”default” global_colors_info=”{}”][et_pb_text admin_label=”Increase your deposit” _builder_version=”4.17.3″ _module_preset=”default” header_3_text_color=”#fe9125″ global_colors_info=”{}”]<\/p>\n [\/et_pb_text][et_pb_text _builder_version=”4.17.3″ _module_preset=”default” global_colors_info=”{}”]<\/p>\nWhich factors affect interest rates on car finance?<\/strong><\/h2>\n
Improve your credit score<\/strong><\/h3>\n
Reduce your loan term<\/strong><\/h3>\n
Increase your deposit<\/strong><\/h3>\n