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How should I compare car financing offers?

Written by RD Matharu, Founder of ASK RD · Published

Compare financing on three figures together: the amount financed, the APR, and the term in months. Those three produce the payment, so any offer that gives you a payment without all three is incomplete.

Then compare the total of payments — APR multiplied across a longer term can make a lower monthly payment the more expensive choice.

Define the terms

  • Amount financed — the balance you are borrowing.
  • APR (annual percentage rate) — the yearly cost of borrowing, expressed as a percentage.
  • Term — how many months you will pay.
  • Total of payments — the payment multiplied by the term; what you will have paid at the end.

What to look for

  • An APR printed on the document, not quoted verbally.
  • The term stated in months.
  • Whether the rate is contingent on approval, and what happens if the lender returns a different rate.
  • Whether any product you agreed to is included in the financed balance.

Questions to ask

  • What is the APR and the term in writing?
  • Is this rate approved, or still pending?
  • What is the total of payments over the full term?
  • Does this payment assume any optional product?

When ASK RD can help

ASK RD recalculates the financing math from the printed figures. If a page shows a payment without an APR or a selected term, ASK RD says the financing cost could not be evaluated rather than estimating one.

Common mistakes

  • Comparing payments across different terms.
  • Signing with the APR left blank or unstated.
  • Extending the term to absorb an add-on you did not want.

Frequently asked questions

Should I focus on monthly payment or total price?

Set the price first, then look at financing. The payment is the output, so it can be lowered without improving the deal.

What if the printed page has no APR?

Then the financing cost is unknown. Ask for the APR and term in writing before signing anything.

Have a deal in front of you? ASK RD can help you analyze the numbers and identify questions to ask before you sign.

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ASK RD is AI-powered deal analysis and guidance. Prefer hands-on help through a purchase? See ASK RD Concierge, our optional human assistance. ASK RD is not a dealership, lender, law firm or a substitute for legal, tax or financial advice.

Keep reading

How do I calculate the real price of a car?What should I look for on a car payment quote?What is negative equity on a car?What is GAP insurance and what should I check?

More on the ASK RD car buying guide and in Stump the Dealer deal breakdowns.