Used car guide · Elgin Auto Sales & Service Center · Elgin, IL
APR vs Interest Rate on a Car Loan
When you finance a car, you will see two percentages: the interest rate and the APR. They are not the same number. Here is what each one means, where to find them in your loan paperwork, and how the Consumer Financial Protection Bureau (CFPB) says to use them to compare auto loans.
Interest ratethe cost of borrowing the money
APRinterest rate plus lender fees
APR to APRthe CFPB's rule for comparing
Before you signwhen the APR must be disclosed
The short answer
The CFPB says a loan's interest rate is the cost you pay to the lender for borrowing money, while the Annual Percentage Rate (APR) is the interest rate plus additional fees charged with the loan, such as origination charges and other fees charged when the loan is made. Both are expressed as a percentage. Because the federal Truth in Lending Act requires lenders to give you the APR before you finalize your car loan, you can use the APR to compare auto loans; just compare APRs to APRs, not APRs to interest rates.
What the interest rate is
The CFPB describes an interest rate as the cost you pay to the lender for borrowing money to finance your loan, on top of the loan amount, or principal. The higher the interest rate, the more you will pay over the life of your loan.
From the CFPB's What is the difference between a loan interest rate and the APR?, read October 29, 2026.
What the APR is
The APR is the interest rate plus any additional fees charged by the lender. The CFPB says this includes origination charges and other fees charged when the loan is made.
In its explanation of the Truth-in-Lending disclosure, the CFPB calls the APR the total cost of credit, including the interest rate and mandatory fees, expressed as a yearly rate in a percentage. It says the APR is not the same as the interest rate and can be significantly higher with added fees.
From the CFPB's What is the difference between a loan interest rate and the APR? and What is a Truth-in-Lending disclosure for an auto loan?, read October 29, 2026.
Interest rate vs APR side by side
Both numbers are percentages, and both are measures of the price you pay to borrow. Here is how they differ:
| Interest rate | APR | |
|---|---|---|
| What it measures | The cost you pay the lender for borrowing the money. | The interest rate plus additional fees charged with the loan. |
| Lender fees included? | No. | Yes: origination charges and other fees charged when the loan is made. |
| Shown as | A percentage. | A yearly rate, as a percentage. |
| Best use | Understanding the cost of borrowing the principal. | Comparing loans from different lenders, APR to APR. |
From the CFPB's What is the difference between a loan interest rate and the APR? and What is a Truth-in-Lending disclosure for an auto loan?, read October 29, 2026.
Where to find the APR: your Truth-in-Lending disclosure
The CFPB says the federal Truth in Lending Act (TILA) requires lenders and dealers to give you certain disclosures before you sign your contract that explain your auto loan's costs and terms. The disclosure uses these terms:
- Annual Percentage Rate (APR): the total cost of credit, including the interest rate and mandatory fees, as a yearly rate.
- Finance Charge: the total amount of interest and certain fees you will pay over the life of the loan if you make every payment when due.
- Amount Financed: the amount you are borrowing.
- Total of Payments: the sum of all the payments you will have made at the end of your loan term, including the principal plus all finance or interest charges.
The disclosure also covers the number of payments, late fees and whether you can prepay your loan without a penalty. The CFPB notes it is often provided with your loan contract, but you should request it before you sign so you can review it in detail and make sure it matches the information and rates you have been given. TILA also requires that you get a fully filled-in form, not a blank one. If you feel uncomfortable or pressured into signing, you can always walk away.
From the CFPB's What is a Truth-in-Lending disclosure for an auto loan?, read October 29, 2026.
How to compare auto loan offers
Because all lenders must provide the APR, the CFPB says you can use it to compare auto loans, as long as you compare APRs to APRs and not APRs to interest rates. It also says dealers and lenders are not required to offer you the best available rates, and that the best way to reduce your costs is to shop around and compare rates between different lenders.
You can get financing through a dealer or go directly to a bank or credit union. With dealer-arranged financing, the CFPB explains, the dealer forwards your information to one or more lenders, a lender that agrees to finance the loan quotes the dealer a "buy rate," and the rate you are offered can include additional interest that compensates the dealer for handling your financing. You can ask if there were other offers and whether those had lower interest rates or better terms. Getting preapproved by a bank or other lender gives you a loan quote, including an interest rate, loan length and maximum loan amount, that you can compare with what a dealer may provide.
From the CFPB's What is the difference between a loan interest rate and the APR? and What are the different ways to buy or finance a car or vehicle?, read October 29, 2026.
How your credit affects the rate you are offered
The CFPB says your credit report and scores are some of the most important factors in the rates a lender offers you for an auto loan: in general, the lower your credit score, the more likely you are to receive a higher interest rate. It suggests reviewing your credit reports before you shop, to spot and dispute any errors.
Shopping for rates generally has a limited impact on your credit. The CFPB says credit inquiries for an auto loan that take place within 14 to 45 days of each other are counted as one inquiry, so it helps to keep your loan shopping within a few weeks.
From the CFPB's What should I know before I shop for a car or auto loan? and What are the different ways to buy or finance a car or vehicle?, read October 29, 2026.
Financing a used car at Elgin Auto Sales
Our finance team can walk you through your options. You can start with our finance application before you visit, and ask to see the APR, finance charge, amount financed and total of payments on your disclosure before you sign. If you bring a preapproval from your own bank or credit union, compare its APR with ours, APR to APR.
Elgin Auto Sales & Service Center is at 1200 E. Chicago St. in Elgin. Sales is open Monday to Friday 9 a.m. to 7 p.m. and Saturday 9 a.m. to 6 p.m.; our service department, which works on all makes, is open Monday to Friday 8 a.m. to 5 p.m. and Saturday 8 a.m. to 4 p.m. Both are closed Sunday. Get directions.
Shop used inventory or contact us with questions.
APR vs interest rate FAQ
What is the difference between APR and interest rate on a car loan?
The CFPB says the interest rate is the cost you pay to the lender for borrowing money, and the APR is the interest rate plus additional fees charged with the loan, such as origination charges. Both are percentages.
Is the APR higher than the interest rate?
Because the APR adds lender fees to the interest rate, the CFPB says it is not the same as the interest rate and can be significantly higher with added fees.
Which number should I use to compare car loans?
The APR. The CFPB says all lenders must provide it, so you can use it to compare auto loans, as long as you compare APRs to APRs and not APRs to interest rates.
Where do I find the APR on my car loan?
On your Truth-in-Lending disclosure. The CFPB says the Truth in Lending Act requires lenders and dealers to give it to you before you sign your contract, and that you should request it before signing so you can review it.
Does my credit score affect my APR?
Yes. The CFPB says your credit report and scores are some of the most important factors in the rates a lender offers, and that in general a lower score makes a higher interest rate more likely.
Will shopping for a car loan hurt my credit?
The CFPB says auto loan credit inquiries within 14 to 45 days of each other are counted as one inquiry, so rate shopping generally has a limited impact if you keep it within a few weeks.
Ready to talk financing?
Start with our finance application, then visit us at 1200 E. Chicago St. in Elgin.
Sources
Interest rate, APR, Truth-in-Lending and loan shopping guidance is from the Consumer Financial Protection Bureau (consumerfinance.gov), read on October 29, 2026. This is general information, not legal or financial advice; read your own loan contract and disclosures. Our address and hours are from our own website, checked the same day. Photo is of our dealership.
- What is the difference between a loan interest rate and the APR?, Consumer Financial Protection Bureau
- What is a Truth-in-Lending disclosure for an auto loan?, Consumer Financial Protection Bureau
- What should I know before I shop for a car or auto loan?, Consumer Financial Protection Bureau
- What are the different ways to buy or finance a car or vehicle?, Consumer Financial Protection Bureau
- Finance center and sales hours, Elgin Auto Sales & Service Center
- Home page: address and sales hours, Elgin Auto Sales & Service Center
- Service department and hours, Elgin Auto Sales & Service Center