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  • Freedom to Choose Different Types of Vehicles
  • Fixed Interest Rates
  • Completing a search doesn't affect credit score
  • Flexible Terms
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Tip: Look for APR deals that are fixed for the entire loan term. Some lenders offer low initial rates that increase after a certain period.

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What Are Low APR Car Loans?

Low APR (Annual Percentage Rate) car loans are financing options that offer borrowers a lower interest rate compared to traditional car finance deals. These loans can help you save money on the total cost of your car purchase by reducing the amount of interest you pay over the life of the loan.

When searching for the best low APR car loans, it's essential to compare offers from multiple lenders and consider factors such as:

What Are Low APR Car Loans
  • Loan term length
  • Down payment requirements
  • Credit score eligibility
  • Vehicle restrictions (new vs. used, car type)
  • Optional final payment
  • Annual mileage
  • finance contract
  • Various finance offers

By doing your research and shopping around, you can find affordable APR auto loans that fit your budget and help you get behind the wheel of your dream car, whether it's a sleek Alfa Romeo or an eco-friendly electric SUV like the Hyundai Kona Electric or the Cupra Born.

Types of Low APR Car Finance

There are several types of low APR car finance available, each with its own benefits and drawbacks. Some of the most common options include:

  1. Hire Purchase (HP): With an HP agreement, you pay a deposit and then make fixed monthly payments over a set term, typically 1-5 years. At the end of the contract, you own the car outright. Some lenders offer low APR HP deals with no minimum deposit required.
  2. Personal Contract Purchase (PCP): PCP deals involve paying a deposit followed by lower monthly payments compared to HP. At the end of the agreement, you can either return the car (subject to fair wear and tear), pay a final balloon payment to own it or trade it in for a new vehicle. Many PCP offers come with low APR finance and flexible contract lengths.
  3. Personal Loan: A personal loan allows you to borrow a fixed sum from a lender and then repay it, plus interest, over an agreed term. You own the car outright from the start and have more flexibility compared to other finance options. Some lenders offer low APR personal loans with longer repayment periods to help keep your monthly budget manageable.
  4. 0% APR Deals: Some manufacturers offer 0% APR offer on selected new best cars, such as the Hyundai Ioniq or the Lexus RZ. These deals allow you to spread the cost of the vehicle over a set period without paying any interest, potentially saving you thousands of pounds.

Did you know: Some manufacturers offer low or 0% APR deals on specific models to boost sales. Check if your desired car has any such promotions.

Soft Search Car Loans

Soft search car loans, also known as no impact credit search car finance or pre-approval soft search car loans, allow you to check your eligibility for vehicle finance without affecting your credit score.

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How to Find the Lowest APR Car Financing

To find the lowest APR car financing deals, follow these tips:

  1. Check your credit score: Lenders typically offer the best APR rates to borrowers with excellent credit scores. Could you check your credit report for any errors and take steps to improve your score, such as paying bills on time and reducing credit card balances? You can negotiate a better APR and longer period of finance with your lender if you have a good credit history.
  2. Shop around: Don't settle for the first low APR deal you find. Compare offers from multiple lenders, including banks, credit unions, and online lenders, to ensure you're getting the best rate possible. Look for lenders that specialise in low APR car finance products and have a reputation for excellent customer service.
  3. Consider new vs. used: New cars often qualify for lower APR deals compared to used vehicles. However, used cars may have lower price tags, which could result in a lower overall cost even with a slightly higher APR. Consider the total cost of the car, including interest charges, when making your decision.
  4. Negotiate the price: Before applying for financing, try to negotiate the best price possible for your chosen vehicle. A lower purchase price means you'll need to borrow less, reducing the total interest you'll pay over the life of the loan. Don't be afraid to haggle with the dealer or seller to get the best deal.
  5. Look for manufacturer incentives: Many car makers offer low APR financing specials, deposit contributions, or other incentives that can help reduce your overall costs. Keep an eye out for these deals when shopping for your new car, and don't forget to ask about any available voucher codes or special offers.
  6. Use a car loan calculator: Plug different loan terms, down payment amounts, and interest rates into a car loan calculator to estimate your monthly payments and total interest charges. This can help you find the most affordable financing option for your budget and ensure you're not overextending yourself financially.

Remember: A slightly higher APR with a shorter loan term might cost less overall than a lower APR with a longer term. Always calculate the total cost of the loan.

Can I Get a Low APR Car Loan with Bad Credit

Can I Get a Low APR Car Loan with Bad Credit?

To improve your chances of getting approved for a low APR car loan with bad credit:

  • Check your credit report for errors and dispute any inaccuracies
  • Save up for a larger down payment to reduce the amount you need to borrow
  • Consider a co-signer with good credit to help you qualify for better rates
  • Choose a less expensive vehicle to reduce the loan amount and monthly payments

Keep in mind that even if you qualify for a low APR loan with bad credit, you may still face higher interest rates compared to borrowers with excellent credit. However, by taking steps to improve your credit and shopping around for the best deals, you can minimise your interest charges and keep your car finance costs as low as possible.

Tip: Consider improving your credit score before applying. Even a small increase could help you access better APR rates.

What Factors Affect Your Car Loan APR?

Several factors can impact the APR you're offered on a car loan, including:

  1. Credit score: Borrowers with higher credit scores generally qualify for lower APR rates, as they're seen as less of a risk to lenders. If you have a good credit score, be sure to leverage this when negotiating your APR with potential lenders.
  2. Loan term: Shorter loan terms (e.g., 36 months) often have lower APRs compared to longer terms (e.g., 60+ months), as there is less risk for the lender. However, a shorter term may result in higher monthly payments, so be sure to choose a term that fits your budget.
  3. Down payment: Making a larger down payment can help you secure a lower APR, as it reduces the amount you need to borrow and shows the lender you're invested in the purchase. Consider saving up for a bigger deposit to minimise your interest charges over the life of the loan.
  4. Vehicle type: Some lenders offer lower APRs for certain vehicle types, such as new cars, electric vehicles, or models with high resale values. If you're in the market for an electric car, such as the Hyundai Kona or the Lexus RZ, you may be able to take advantage of special low APR deals designed to incentivise eco-friendly purchases.
  5. Lender competition: APRs can vary significantly between lenders, so it's essential to shop around and compare offers to ensure you're getting the best deal possible. Don't be afraid to negotiate with lenders or leverage competitive offers to secure a lower rate.

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What to Consider When Choosing a Low APR Car Loan

When comparing low APR car finance options, consider the following factors:

  • Total cost of borrowing: Look beyond the monthly payments and consider the total amount you'll pay over the life of the loan, including interest charges and fees. A low APR can help minimise your overall costs, but be sure to factor in any additional expenses, such as early repayment penalties or balloon payments.
  • Loan term: A longer loan term may result in lower monthly payments but could mean paying more in interest over time. Aim for the shortest term you can comfortably afford to minimise your total interest charges.
  • Down payment: A larger down payment can help you qualify for a lower APR and reduce your monthly payments, but make sure it fits within your budget. Consider saving up for a bigger deposit or exploring no-money-down options if you're short on cash.
  • Early repayment fees: Some lenders charge a penalty for paying off your loan early. If you think you may want to pay off your loan ahead of schedule, look for deals with no early repayment fees to avoid any unexpected costs.
  • Other costs: Remember to factor in additional expenses such as insurance, maintenance, and fuel costs when budgeting for your new car. Consider opting for gap insurance to protect yourself in case your car is totalled or stolen, and explore money-saving options like home EV chargers if you're purchasing an electric vehicle.
What to Consider When Choosing a Low APR Car Loan

Did you know: Some lenders offer loyalty discounts. If you have existing accounts with a bank, check if they offer preferential APR rates on car loans.

Compare Zero deposit car finance

Zero deposit car finance is an appealing option for individuals looking to acquire a new vehicle without paying an upfront amount.

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Frequently Asked Questions

A good APR for a car loan depends on your credit score, loan term, and other factors. As of 2023, the average APR for a New Car Loan is around 4% for borrowers with excellent credit, while those with lower scores may see rates of 10% or higher.

While you may not be able to negotiate the APR directly, you can take steps to improve your credit score, shop around for the best deals, and negotiate the vehicle price, all of which can help you secure a lower APR.

To qualify for the lowest APR car loans, you'll typically need a credit score of 700 or above. However, some lenders may offer competitive rates for borrowers with scores in the mid-600s.

To lower your car loan APR, improve your credit score, make a larger down payment, choose a shorter loan term, and compare offers from multiple lenders to find the best deal.

Low APR car loans can be worth it if they help you save money on interest charges over the life of the loan. However, be sure to consider other factors, such as loan term, down payment, and total cost of borrowing, before making a decision.

Some car manufacturers offer 0% APR financing deals on select new models. However, these deals may require a high credit score and often have shorter loan terms compared to traditional financing options.

Yes, some lenders offer low APR financing for used cars, although the rates may be slightly higher compared to new car loans. Be sure to compare offers from multiple lenders to find the best deal.

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References

  • [1] Experian
  • [2] Investopedia

Page last updated on: 30/05/2024

Page reviewed by: Shay Ramani

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