A car lease quote is built from a few numbers, and the one that hides the interest rate is the money factor. It is a small decimal such as 0.00125. Multiply it by 2,400 and you have the approximate APR: 0.00125 × 2,400 = 3.0%.
| MSRP | $35,000 |
|---|---|
| Negotiated price | $33,000 |
| Acquisition fee, rolled in | $895 |
| Residual, 60% of MSRP, 36 months | $21,000 |
| Money factor | 0.00125 |
Price plus the capitalized fee, minus any rebates and cash down: $33,000 + $895 = $33,895.
You pay for the value the car loses: ($33,895 − $21,000) ÷ 36 = $358.19 a month.
The interest part: ($33,895 + $21,000) × 0.00125 = $68.62 a month.
$358.19 + $68.62 = $426.81 before tax. At 7% tax that is $456.69.
If you know the payment, the same formula gives the money factor: (payment − depreciation) ÷ (capitalized cost + residual). From $426.81 that returns 0.00125, so the rate is 3.0%. If the manufacturer's base rate for your credit tier is 0.00085, the other 0.0004 is markup: about $22 a month, $790 over the lease.
Find the rate inside your quote
Multiply the money factor by 2,400. A money factor of 0.00125 is 3.0 percent APR and 0.0025 is 6.0 percent.
The rent charge is calculated on the average of what you owe over the lease, which is the capitalized cost plus the residual divided by two. Multiplying the sum by the money factor instead of the average by half the rate is the same arithmetic, which is why the formula adds the two before multiplying.
Often yes. The lender supplies a base money factor for each credit tier and the dealer may add a markup, which is the dealer's compensation. Asking for the base rate in writing, or entering your quote into the tool to find the rate inside the payment, shows how much markup there is.