When is APR Used?

August 9th, 2019 by

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 Boch Automotive, where your trust and satisfaction are highly valued. We make it our mission to explain every little detail of the car buying process so you are guaranteed to leave with confidence and a smile after you purchase.

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. Whether it’s a good or bad APR really depends on the economy, your individual tolerances, and your qualifications.

A higher APR means higher, short-term payments. A lower 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.

When is APR used at Boch Automotive in Massachusetts

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? Well, 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%

Do you still have questions about APR or other car financing terms? Ready to visit our dealership? Contact our staff at Boch Automotive locations.

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