The Annual Percentage Rate (APR) is a simple way to see the full cost of borrowing money.
An APR combines the interest rate and any admin fees with the length of term to give you one figure that can be easily compared across products. If one provider has low interest rates and high fees, but another is offering high interest with low fees, the APR allows you to easily see which one is the best value.
What is Annual Percentage Rate (APR)?
How does APR work?
If you find a 0% APR deal on offer, it means there are no admin fees or interest applicable.
In most other cases, the admin fees and interest are added together to calculate the APR over the total length of the loan. These interest charges are added to the amount borrowed to calculate the total cost of finance.
However, additional benefits such as deposit contributions from the manufacturer or retailer will reduce the amount you need to finance. So even with a higher APR, your total cost of borrowing could still be lower, with smaller monthly payments.
Representative vs personal APR
All car finance lenders are required to show a representative APR in their advertising. This is the APR that they expect more than half of all applicants to get if they took up the offer. You’ll normally find the representative APR alongside a representative example, to help make process even clearer.
Bear in mind that your personal APR may differ from the representative APR depending on your circumstances.
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