The term, car lease rate, refers to the finance rate in a car lease. This rate is called, Money Factor, and is shown as a very small number, such as .00245, which is equivalent to 5.9% APR.
Lease rate, or Money Factor, can be converted to equivalent interest APR by multiplying Money Factor by 2400. Or, if you have an interest rate and want to convert to Money Factor, simply divide APR interest rate by 2400.
For example, if your lease finance rate is .0011, multiply by 2400 to get equivalent 2.64% APR interest rate — not a bad rate. However, a rate of .0051 is equivalent to 12.24% APR interest — not good at all.
This conversion method is not dependent on the number of months in the lease — the conversion factor is always 2400, regardless of whether the lease term is 24 months, 36 months, or any other number of months.
Car lease rates can vary between lease companies, just as loan and home mortgage rates differ. Smart leasing consumers shop for the best rates.
There’s no easy way to know what rate you’re getting in a lease — unless you ask. Don’t be surprised if your car sales person doesn’t know the rate, or even know what lease rate is. He’ll have to go ask the finance manager.
Even when you get your lease agreement contract with all the numbers related to the lease deal, you won’t see the lease rate (money factor) listed anywhere in the contract. It’s not required by Federal regulations. The only item in the contract that relates to lease rate is the “total of finance charges” over the term of the lease. Obviously, the higher your lease rate, the higher the total finance charges. We explain how to calculate lease rate (money factor) in this article.
Finance rate is only one part of a lease deal. Make sure you’re also getting a good deal on the other factors in your lease such as residual value and lease price. A not-so-good deal can easily have a low lease rate, but a poor residual.
Car lease rates also depend on a customers’s credit score. The higher the score, the better the rate. Dealers sometimes are allowed by lease companies to “pad” the lease rate to provide a little extra profit. This is called “reserve” or “buy-rate/sell-rate.”
If you don’t know your most current credit score, you should.
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