When is APR Used?

When it comes to buying a car, you want a trusted dealer that will make sure you completely understand your agreement. That's why you've come to Lincoln of New Bern, where your trust and satisfaction are highly valued. We make it our mission to explain all the gory details of the car buying process so you are guaranteed to leave with total confidence in your purchase and a smile.

So, what is APR anyway? It stands for Annual Percentage Rate, or the total amount of interest paid on your car loan over one year, including the fees and charges of initiating and maintaining the loan.

This means that an APR is only used when you purchase a car and take out a loan, it is not used for leases. APR varies depending on the loan offer, and whether its a good or bad APR really depends on the economy, your individual tolerances and qualifications.

A high APR means higher, short-term payments. A low APR means a lower monthly payment, but loans of this kind are dependent upon a strong economy and a high credit score for the borrower. 

APR versus Money Factor

Simply put, if you're leasing a car, your monthly payments include depreciation, taxes, and interest, and the money factor determines the interest charge. In this way, a money factor is used in lieu of APR. Are they equivalent? Not really.

Then why are money factors even a thing? Because leases require more specific components in the equation, making it much harder to calculate in the conventional way. So, instead, we use a money factor.

Nonetheless, calculating the equivalent APR for your lease can still be helpful. You can convert your money factor into the more commonly used APR by simply multiplying the money factor by 2,400.

Money Factor x 2,400 = APR

For example: (0.03) x 2,400 = 7.2%

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