# How to Calculate APR on a Car Loan

Contents

- How to Calculate APR on a Car Loan
- Find the interest rate and the loan’s term length
- Convert the interest rate from a percentage to a decimal
- Add 1 to the decimal interest rate
- Raise the result from Step 2 to the power of the loan’s term length in months
- Subtract 1 from the result of Step 4
- Divide the result of Step 3 by the result of Step 5
- Multiply the result of Step 6 by 100 to find the APR

- What is APR?
- How Does APR Affect My Loan?

How to Calculate APR on a Car Loan – In order to calculate the APR on a car loan, you will need to know the interest rate, length of loan, and amount of the loan.

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## How to Calculate APR on a Car Loan

The calculation of APR on a car loan is actually pretty simple. You just need to know the total amount of interest you will be paying over the life of the loan and the total amount of the loan. With that information, you can calculate the APR by using the formula: APR = (Total interest paid / Total loan amount) * 100.

### Find the interest rate and the loan’s term length

To calculate your Annual Percentage Rate (APR) on a car loan, start by finding the interest rate and the loan’s term length in months. Then, use this formula:

APR = (Interest rate/12) x term length in months

For example, if you’re paying 10% interest on a 36-month loan, your APR would be ((10%/12) x 36), or 3%.

### Convert the interest rate from a percentage to a decimal

The first step is to convert the interest rate from a percentage to a decimal by moving the decimal point two places to the left. For example, if your loan has an annual percentage rate (APR) of 10 percent, you would convert it to .10.

### Add 1 to the decimal interest rate

To calculate APR on a car loan, you’ll need to start by adding 1 to the decimal interest rate. For example, if your loan’s interest rate is 8%, you would add 1 and get 9. Next, you’ll raise that number to the power of the number of payments you’ll make on the loan. So, if you’re going to make 36 payments (a typical car loan), you would raise 9 to the power of 36. That equals 2,853. Finally, you’ll divide 1 by 2,853 and multiply that quotient by 100 to get the APR as a percentage.

### Raise the result from Step 2 to the power of the loan’s term length in months

After you find the periodic interest rate for your loan, you can calculate the Annual Percentage Rate, or APR, for the loan. The APR will be higher than the periodic rate because it factors in the total cost of borrowing money, including any fees that you may be charged.

To calculate the APR on a loan, follow these steps:

1. Find the periodic interest rate for your loan. This is the interest rate charged by the lender divided by the number of payment periods in a year. For example, if your loan has an 8% interest rate and you will make monthly payments, your periodic interest rate would be 0.08/12, or 0.0067.

2. Multiply the periodic interest rate by the number of payment periods in a year. In our example above, this would give you 0.08/12 x 12, or 0.96.

3. Add 1 to your result from Step 2 and raise this number to the power of the loan’s term length in months – 1 . In our example above, if your loan had a 5 year term (60 months), this would give you 1 + 0.96 = 2.9660 . To raise this number to the power of 59 , type 2.9660 ^ 59 into a calculator and press Enter . This should give you a result of 8584932592764928773794996029004880643595739644972117352154097167668249555616675954257778063814083257419709257582708047261693629733366709697609096717076261891370345998192541183393287491794532589735566515850875219011446237656772559618431591972338844441021493910018769511808532418856759509193169566041861911566919295750591651379197975226861367049577633224429112068299036168786267012825735429734379831260076070699744785994669226204198185209305997819470535936542066713437979048246007361251573106408197 September 16

4-Divide your result from Step 3 by ( 1 – (the periodic interest rate xterm length in months) ). In our example above, this would be 8584932592764928773794996029004880643595739644972117352154097167668249555616675954257778063814083257419709257582708047261693629733366709697609096717076261891370345998192541183393287491794532589735566515850875219011446237656772559618431591972338844441021493910018769511808532418856759509193169566041861911566919295750591651379197975226861367049577633224429112068299036168786267012825735429734379831260076070699744785994669226204198185209305997819470535936542066713437979048246007361251573106408197 September 16 ÷ ( 1 – (0.0067 x 60) ) = 96860794505450173654761641352776442731024120019608885557796840110348229296809277205576652303581750816840966213403168090597037542827410730324436925954004482582357557083572283584773848065734910430229395481957571087949826740726324528832944593674874310466660344410699733469069602653741522760857068904218316685139458389782287620935629172803684225312460812413215614623312318437710526613865747822620059770360475408877764944958955575228874901548748540765979639629855695010990268506758181180318004245154405194516858817865816326795290448199022465078099903307472542089865417761459501539846402160600712833635488581080210779705129886000978911324430 looking forward to hearing from you soon

### Subtract 1 from the result of Step 4

After you’ve converted the periodic rate to a monthly rate and added in any fees, it’s time to calculate the APR.

To calculate the APR on a car loan, you’ll need to follow these steps:

1. Convert the periodic rate to a monthly rate. To do this, simply divide by 12. For example, if your periodic rate is 1.5%, your monthly rate would be 0.125% (1.5% ÷ 12 = 0.125%).

2. Add in any fees. If your loan has an origination fee of $500 and a prepayment penalty of 3%, your monthly rate would be increased by $17 ($500 ÷ 12 = $41.67 + 3% = $42.92).

3. Calculate the daily simple interest rate by multiplying the monthly rate by 30 (since there are roughly 30 days in a month). For example, if your monthly rate is 0.125%, your daily simple interest rate would be 0.004167% (0.125% x 30 = 0.004167%).

4. Raise 24 (the number of months in 2 years) to the power of the daily simple interest rate from Step 3 (this will give you compound interest for 2 years). Then, subtract 1 from that result (.24^0.004167%-1=1-1=0). So, if your daily simple interest rate was 0.004167%, your result would be 0%. Now you have your compound interest factor!

5. Multiply thecompound interest factor from Step 4 by the loan amount plus any fees ($10,000 + $500 = $10,500). So, if your loan amount was $10,000 and you had an origination fee of $500, you would multiply $10,500 by 1 (since ourcompound interest factor was 1), which equals $10,500

### Divide the result of Step 3 by the result of Step 5

After you’ve multiplied the periodic rate by the number of periods in a year, divide that result by the number of periods in the loan. This will give you the APR for your car loan.

### Multiply the result of Step 6 by 100 to find the APR

The Bottom Line

An annual percentage rate (APR) is a broader measure of the cost to you of borrowing money, also expressed as a percentage rate. In general, the APR reflects not only the interest rate but also any points, mortgage broker fees, and other charges that you pay to get the loan. For that reason, your APR is usually higher than your interest rate.

## What is APR?

When you’re car shopping, you’ll likely see the term APR thrown around a lot. APR stands for annual percentage rate, and it’s the interest rate you’ll pay on your car loan. It’s important to understand how APR works so that you can be sure you’re getting the best deal on your loan. In this article, we’ll explain how to calculate APR on a car loan.

### APR is the annual percentage rate

The APR is the annual percentage rate. The APR includes the interest rate and any other costs associated with taking out the loan, such as points, origination fees, and service charges. The APR makes it easier to compare loan offers because it’s a single number that represents the true cost of borrowing money.

You can use the APR to estimate how much you’ll pay in interest over the life of a loan. For example, if you’re considering a $100,000 loan with a 4% interest rate and 2 points, you would calculate the APR as follows:

4% + 2 points = 6%

$100,000 x 6% = $6,000

$6,000 / 360 (number of days in a year) = $16.67

Therefore, your monthly interest payment would be $16.67 and your total interest payments over the life of the loan would be $6,000.

### It’s the cost of borrowing money for one year

APR is the cost of borrowing money for one year, expressed as a percentage of the loan balance. It includes the interest rate as well as any fees charged by the lender.

To calculate APR on a car loan, divide the interest rate by 12. For example, if the interest rate is 6%, your APR would be 0.5%.

If you’re considering an auto loan, it’s important to understand not only the interest rate but also the APR. That’s because the APR is a more accurate reflection of the true cost of borrowing money.

## How Does APR Affect My Loan?

Your APR is the rate at which you’ll be repaying your car loan, including interest and fees. It’s important to understand how APR works so that you can make the best decision when choosing a loan. In this article, we’ll break down everything you need to know about APR.

### The higher the APR, the more you’ll pay in interest over the life of the loan

Annual percentage rate (APR) is the cost of borrowing money, expressed as a yearly percentage rate. APR includes both the interest rate paid on the loan and any fees charged by the lender. The higher the APR, the more you’ll pay in interest over the life of the loan.

When you’re car shopping, it’s important to look at the total cost of ownership, not just the purchase price. The APR will give you a good idea of how much interest you’ll pay on your car loan over time, so you can compare different loans and make sure you’re getting the best deal.

To calculate APR on a car loan, simply multiply the interest rate by the number of months in the loan term. For example, if you’re paying 5% interest on a 36-month loan, your APR will be 5% x 36, or 180%.

You can also use an online APR calculator to do the math for you. Just enter your loan amount, interest rate and loan term into the calculator and it will spit out your APR.

Once you have your APR, simply compare it to other loans to see which one is going to save you money in the long run. Keep in mind that a lower purchase price isn’t always better if it comes with a higher APR. Always look at the big picture when comparing car loans!

### The lower the APR, the less you’ll pay in interest over the life of the loan

The lower the APR, the less you’ll pay in interest over the life of the loan. However, that’s not the only factor to consider when getting a car loan. You should also look at the length of the loan, the down payment, and the monthly payment to make sure you’re getting the best deal.

APR, or annual percentage rate, is the interest rate you’ll pay on your car loan. It’s important to shop around for a low APR because it can save you thousands of dollars in interest over the life of your loan.

When you’re shopping for a car loan, lenders will give you two rates: The interest rate and the APR. The interest rate is what you’ll pay on your monthly payments, and the APR is what you’ll pay on the entire loan over its lifetime.

It’s important to compare both rates when shopping for a car loan because they can be very different. For example, let’s say you’re looking at two loans: One with an interest rate of 4% and an APR of 5%, and one with an interest rate of 6% and an APR of 7%. The first loan has a lower interest rate, but a higher APR. That means that while your monthly payments will be lower with the first loan, you’ll ultimately pay more in interest because of the higher APR.

To get the best deal on your car loan, it’s important to shop around and compare rates from multiple lenders. It’s also important to understand how APR works so that you can make sure you’re getting a good deal.