How to Convert a Lease Money Factor to an Interest Rate

Auto lease payments are often calculated using a lease factor instead of an interest rate or annual percentage rate (APR). The use of a money factor makes calculating lease payments easier for the dealer but keeps the actual interest rate of the lease a mystery to the car buyer. The ability to convert the lease factor allows the buyer to make sure that the lease rate is competitive and that the dealer is not trying to take advantage of the lease contract's structure for extra profit.

Instructions

1

Obtain the lease money factor from the dealership or leasing company. The lease factor is not printed on the lease contract. It will be a small decimal figure, such as 0.003125.

2

Multiply the lease factor by 2,400 to calculate the lease APR. In the example, 0.003125 times 2,400 gives an interest rate of 7.5 percent.

3

Divide a car purchase or car lease interest rate by 2,400 to calculate a lease factor. You can use rates from other sources to compare to the lease factor the dealer is giving on your lease quote. For example, an interest rate of 6 percent converts to a lease factor of 0.0025.