Auto Lease Tidbit

As I've noted in the comments to this post, auto lease agreements are not required to disclose the interest rate used to determine the charge for the use of money over time.

However, it can be relatively easily calculated from only three numbers on the lease agreement.

In the section of the agreement that determines your monthly payment find the Rent Charge. Back up slightly and find the Adjusted Capitalized Cost and the Residual Value.

1. Divide the Rent Charge by the sum of the Adjusted Capitalized Cost and the Residual Value.

2. To get the interest rate, multiply the above by a number that depends on the length of the lease.

For a two year lease, multiply by 100.

For a three year lease, multiply by 66.67.

For a four year lease, multiply by 50.

For a five year lease, multiply by 40.

For a six year lease, multiply by 33.33.

In general, multiply by 200 and then divide by the number of years.

For a real world example :

Rent Charge = $4405.66
Adjusted Capitalized Cost = $23329.74
Residual Value = $12661.00

Divide $4405.66 by the sum of $23329.74 and $12661.00 ($35990.74)

This equals 0.122410931256206457549914227937519.

For a four year lease, multiply by 50 to get the interest rate.

6.12054656281032287749571139687597%

The 'money factor' is the interest rate divided by 2400.

MF = 0.00255022773450430119895654641536499

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