When you finance a car with a loan, the interest rate is shown as an APR (annual percentage rate). In a lease, the comparable “interest” portion is usually shown as a money factor, a small decimal such as 0.00150. Both represent what you’re paying to use the lender’s money, but they’re calculated and displayed in different formats.
A common shortcut is:
APR ≈ Money Factor × 2,400
Example: If your lease money factor is 0.00150, the approximate APR is 0.00150 × 2,400 = 3.6% APR.
To estimate the money factor from an APR:
Money Factor ≈ APR ÷ 2,400
Example: 6.0% APR ÷ 2,400 ≈ 0.00250.
With a loan, APR applies to the amount financed (principal) as it’s paid down over time. With a lease, the rent charge is generally based on the sum of the adjusted cap cost and residual value, which can make the finance portion of a lease payment seem surprising even when the money factor converts to a reasonable APR.
Also, a lease payment is primarily driven by depreciation (the difference between the vehicle’s starting price and its residual value), then the rent charge is added on top. That’s why two leases with the same money factor can have very different payments if the residual values or negotiated prices differ.
To make an apples-to-apples comparison, look beyond the APR or money factor and compare total monthly payment, due-at-signing, term length, mileage limits, and fees. For a broader breakdown of costs, fees, and mileage considerations, see lease vs. buy: compare costs, fees, and mileage.
Residual value is the estimated value of the vehicle at the end of the lease term. A higher residual usually lowers the depreciation portion of your lease payment.
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