Is it APR or interest? What's the difference? Our finance team at Barber Honda fields these questions daily about auto finance terms. Here's their quick, simple rundown.

Annual Percentage Rate Demystified

The APR on your next auto loan is an amount owed expressed in a percentage. The amount includes loan interest and other fees. Interest is what you pay your lender for letting you use their money. APR fees are additional fees that you pay just for borrowing the money in the first place. When comparing auto financing options between makes, models, years and dealers, compare APR rates instead of APR and interest rates.

Loan Terms

A loan term is the amount of time over which you must repay your loan. Shorter terms may reduce your total loan cost. Longer terms may reduce your monthly car payment, but you pay more interest because the loan's life is that much longer. Loan duration is another way of referring to a loan term. Average auto loan terms vary, but terms up to 72 months or better are becoming quite common.

 

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