Why is An APR Used as Opposed to A Money Factor?

September 30th, 2019 by

You finally found it:The Hands-Down Most Perfect Car Ever with all the bells and whistles you could ask for! You’re already dreaming about trips to the beach, bumping that sound system, and feeling like a beast on the road then…

BAM! Reality hits, and you realize you have some major research to do before jumping into this huge purchase.

Well, you’ve come to the right place. Lancaster Toyota is here to explain all the ins-and-outs of buying or leasing a vehicle, including any potentially confusing financing terms such as APR and money factor. So relax, you’ll be able to drive that perfect car and feel informed, because we did the research for you.

Car Loans & APR

Are you looking to buy that new Toyota? If so, are you going to be taking out a loan?If the answer is yes to both of those questions, than you’ll want to know what an APR is.

APR is the Annual Percentage Rate, or total amount of interest paid on your loan over a year. Determining if an APR is good or bad is based on your individual preferences and financial reach, so it’s a good idea to talk it out with a finance specialist.

 APR versus Money Factor at Lancaster Toyota in East Petersburg | Red 2020 Toyota Camry

Leases & Money Factor

Do you want to lease a new Toyota? If yes, then you’ll want to understand money factors.

Basically, the money factor is the financing rate on a lease, similar to an interest rate on a loan. Money factors exist due to the fact that calculating interest on a lease is more complicated than on a loan, so the leasing company does the math and includes it into the lease cost. They are expressed in very small numbers, such as 0.00275.

You can convert a money factor into an APR by multiplying it by 2,400.

The money factor is rolled into the cost of your lease and not required to be disclosed in your contract, so if you want to know you have to ask.

 APR versus Money Factor at Lancaster Toyota in East Petersburg | Man calculating financial expenses

The Difference Between and APR and a Money Factor

In short, APRs and money factors are similar in concept but used for different purposes.

APRs are used for loans, whereas money factors are used for leases. Both represent the financing or interest on your payments, but are expressed in different ways.

It’s good to know these basics while considering your next Toyota purchase.

We hope this article was helpful, but if you have any lingering questions or are ready to move forward and purchase that new Toyota, come visit our dealership or reach out to one of our team members.

If you enjoyed reading this post and found it helpful, please share with your friends and family, thank you!


Related Posts

Man opening car door of the 2019 corolla

Simple checklist for buying a used car

ou’re about to get a new-ish car, but there are a bunch of questions…

Toyota tacoma running on dirt road

What is TRD?

There is no shortage of variety when it comes to Toyota models and trim levels…

technician changing car engine oil

Synthetic Oil versus Conventional Oil

Servicing a vehicle today has provided you, the consumer, with more options than ever before…

Front view of the New 2020 corolla

What accessories will keep my Toyota protected?

Driving isn’t always predictable, which is why we have insurance…

Posted in Finance Blog