University of Missouri Extension

Car Leasing Information

In 1998 the Federal Reserve Board took a giant step toward clearing up consumer confusion about car leasing by imposing a standard contract on car dealers. The worrisome problem of the "mysterious money factor" still remains confusing. When you lease a car the dealer charges you for interest on the total amount of money the leasing company has sunk in your car. The contract though, still fails to mention the annual percentage rate (APR).

Instead, the salesman may talk about the "money factor", usually a figure like .00333. When you multiply the money factor by 24 (and it is always 24) you get a rough approximation of the APR, in this case 8%. Albert D. Hearn, author of  The Lease Kit states, "many dealers will quote it at 3.33 to make it sound like a low interest rate. Few people understand whether they’re getting competitive financial terms."

Source: There oughta be a law: crushing end-of-lease costs. (1999, October). Consumer Reports, 62.

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Last updated: March 09, 2005
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