What is a good APR for car finance in the UK?

Roman Danaev

21 July 2023

Understanding APR (Annual Percentage Rate) is vital when considering car finance options. It represents the interest you'll pay on your car loan and affects the overall cost. Whether you're buying a new or used car, knowing the ideal APR can help you make a smart decision that suits your budget.

0% APRs

A 0% APR car finance deal in the UK is like finding a pot of gold! It means you won't pay any interest on your car loan. However, it's essential to know that only Franchise car dealers and manufacturers can offer this fantastic offer. If you meet their eligibility criteria, you could save a significant amount on interest.

Low APRs

A low APR in the UK car finance market generally ranges from around 3% to 7%. Securing a low APR is a great deal because it means you'll pay less in interest over the loan term. Those with a good credit history usually qualify for these favourable rates. It's a win-win situation, as you get to drive your dream car while keeping more pounds in your pocket.

Average APRs

The average APR for car finance in the UK falls within the range of 7% to 10%. Several factors influence this rate, such as the lender, loan term, and your credit score. It's essential to compare this rate with other credit options to ensure you're getting a reasonable deal.

High APRs

High APRs in the UK car finance market can be around 15% or more. These rates are typically offered to individuals with lower credit scores or those who may have faced financial challenges. While it's possible to secure a car loan with a high APR, it's essential to explore ways to improve your credit score and find better deals in the future.

Typical car finance APR for a first-time car buyer

If you're a first-time car buyer in the UK, the typical car finance APR can vary depending on their credit history. Younger buyers with limited credit history might face higher APR rates. However, if you have an established credit history and a good credit score, you may qualify for a more favourable rate. Purchasing a new car at a dealership could help you secure a lower rate, but it's essential to ensure that the monthly repayments fit comfortably within your budget.

On average APR you might encounter ranges from 8% to 12%, while individuals with no credit history might encounter rates starting from 20% APR and higher. As a newcomer to car financing, it's essential to understand the rates available and consider building a good credit history to access better deals in the future.

Why knowing average APR for car finance is important

The APR matters because even small differences can significantly impact the total cost of your car loan. Choosing a lower APR can save you money and make your monthly payments more affordable. Let's say you're considering two car finance offers—one with a 7% APR and another with a 10% APR. Over time, the lower APR could save you hundreds or even thousands of pounds.

Final words

When it comes to car finance in the UK, finding the right APR is crucial. Whether it's a 0% deal or a low APR, these offers can help you save money and enjoy your car without breaking the bank. Remember, your credit score plays a significant role in determining the APR you'll receive, so it's worth improving it if you can.

Take your time to shop around and compare offers from different lenders. Understanding the APR and its impact will empower you to make a well-informed decision that aligns with your financial goals.

For personalized assistance in finding the best car finance deal, consider using Carplus as your car finance broker. We'll help you navigate through the options and secure a budget-friendly loan that suits your needs. Drive your dream car with confidence - contact Carplus today!

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