How can the interest rate be disguised in a car lease?

Question

[Source] Personally, I think leasing can be a good way to go. For one thing, leasing allows people to drive more expensive cars. But you have to be careful. Some dealers base leases on 110 percent of the vehicle's sticker price. This is called a "full pop lease" and it's what most dealerships aim for. ♦ Also, it's easy to disguise the interest rate in a lease because it is expressed as a decimal multiplier instead of a more recognizable percentage rate. For example, a 9 percent interest rate becomes .00375.

Please enlarge on the sentences after ♦ (ie the black lozenge)? 9% = 0.09 necessarily, so how's the last sentence true?

Answer 1

You have met the money factor, an invention of some marketing department. It is a function of the capitalized cost and term you agree too.

Money Factor = Total monthly charge/((Net capitalization cost + Residual value) x Term)

Thus, when negotiating a lease, the only thing there is to talk about is the purchase price of the car, which affects the capitalized cost. Residuals are set by whatever third party underwrites the whole thing, so don't try to argue about that. And of course you can pick the term.

0.00375 is the money factor for a 9% APR. Multiply by 2400 to get the APR.

0.00375 * 2400 = 9

If you don't want to do the math, there are tools available online.

Further reading here.