Auto Financing 101: FAQs

AWARE has assembled answers to some of the most common questions asked by consumers. This section is another important tool to help educate all consumers about the most common auto finance questions.

Q. I understand that my credit history will have an impact on what APR I can get. What other factors will affect my rate?

A. There are a number of variables that are used to determine the APR you are offered at a dealership, bank, credit union, or financing company. Things like prevailing rates, the amount of your down payment, the amount you finance, the vehicle make and model, the length of the financing contract, special offers, and market conditions. Additionally, your APR could be affected by the credit history of any co-applicant you may have, such as your spouse. Depending on the financing company, a strong co-applicant may improve your ability to secure a lower APR.

The vehicle financing industry is highly competitive – you will find that it’s not uncommon when shopping around for your financing that you can find different APR’s even just down the street from each other. Shopping around, and negotiating your financing, will put you in a solid decision-making position.

You are right – creditworthiness is a vital component in your APR. Finance companies rely heavily on this information when determining their risk. If you have a history of not managing your finances well – or if you’re new to the credit scene and have little or no credit history – you will be considered a riskier contract, and the rates you are offered will reflect that. Be sure to check your credit reports regularly. You can obtain a free copy of your credit report annually from each of the three major credit bureaus by visiting And be diligent in managing your finances wisely. This strategy will help you in financing any major purchase down the road at a competitive rate.

An interesting aside – you’re not alone in your understanding of the importance of creditworthiness in auto financing. More people understand that creditworthiness impacts APR than know that Dick Cheney is the Vice President of the United States (78 percent versus 69 percent).


Recognizing the need for consumer education, automotive industry leaders have formed AWARE (Americans Well-informed on Automobile Retailing Economics), a collaborative industry effort to provide consumers with information, tools, and other resources to better understand the auto financing system.