Is it true that aPR = interest rate + all fees, as a yearly percentage?

APR = interest rate + all fees, as a yearly percentage

Is it true that always compare APRs, never just interest rates?

Always compare APRs, never just interest rates

Is it true that dealers often advertise low rates but add fees that raise the APR?

Dealers often advertise low rates but add fees that raise the APR

APR includes all fees

APR vs. interest rate on auto loans: the difference matters

Dealers rely on buyers not understanding the difference between interest rate and APR. Here's what you actually pay.

Quick answer

The interest rate is the base cost of borrowing. APR is the interest rate plus all loan fees expressed as a yearly percentage — so APR is always higher than the interest rate. Always compare auto loans by APR, never interest rate alone. Dealers commonly advertise low rates but add origination fees, dealer fees, or required add-ons that raise the true APR by 1-3 percentage points.

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Key takeaways

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Interest rate = base cost of borrowing
APR = interest rate + all fees, as a yearly percentage
Always compare APRs, never just interest rates
Dealers often advertise low rates but add fees that raise the APR

Interest rate is the base cost of borrowing money, expressed as a yearly percentage.

APR (Annual Percentage Rate) includes the interest rate plus all fees — origination fees, dealer finance fees, documentation fees — expressed as a yearly percentage.

Why it matters: A loan advertised at 4.9% interest might have a 6.2% APR once all fees are added. The APR is what you actually pay.

Always ask: "What is the APR, not just the interest rate?" Federal law (TILA) requires lenders to disclose APR, but dealers often lead with the lower number.