Your auto loan interest rate tells you the cost of borrowing money for your car in the form of a percentage; and the Annual Percentage Rate (APR) will tell you the amount of money you will pay in interest alone. How important is the auto loan interest rate?
The auto loan interest rate you are offered by a finance company will depend on what you scored in your credit report but you can shop and choose a favorable program that will allow you to pay less in interest payments than you would otherwise pay according to the offered auto loan interest rate. For example, the Simple method of dividing your monthly payment between interest and principal can work for you to reduce the offered auto loan interest rate.
In the Simple method, the auto loan interest rate is determined by the unpaid principal balance on the loan, the interest rate, and the number of days since the last payment. The rest of the payment goes to the principal. Making early payments or additional payments will reduce the loan’s principal and cut the total auto loan interest you were to pay over the life of the loan.