The way leases are marketed, it almost seems as if the interest rate doesn't matter. Typically, the advertised monthly payment is the hook, with the promise that at the end of the lease term you simply turn in your car and walk away. However, a good monthly payment doesn't necessarily mean you're paying a low rate. Calculate your interest rate so you can ensure you're paying a fair amount for the borrowed funds.
One of the reasons it's hard to calculate an interest rate on a lease is that it is not readily provided. When you're leasing a car, your payment is based on a rather arcane car-industry calculation known as the money factor. While you can use the money factor to calculate your interest rate, it can be hard to do so because the money factor is not legally required to be on your car lease documents. While most dealers will tell you the money factor if you ask, dealers are not required to do so.
Since you can't calculate the interest rate you are paying on a lease without the money factor, be prepared to walk away if a dealer won't provide it.
Once you have the money factor, computing the interest rate on your lease is easy -- simply multiply the money factor by 2,400. For example, if a dealer quotes you a money factor of 0.00125, your interest rate would be three percent. This can be seen in the following formula, where r equals the interest rate and mf equals the money factor:
r = 2,400 x mf, so
r = 2,400 x .00125 and therefore
r = 3
If you were searching for the money factor, the opposite would be true: you'd take the interest rate and divide it by 2,400 to determine the answer.
