How to read the real interest rate on a lease offer

Car leases are quoted in monthly payments, not interest rates, and that's not an accident. A monthly payment is easy to compare to your salary and hard to compare to another lease. The effective interest rate is the number that actually tells you how expensive the financing is.

The effective APR is the rate that makes the present value of everything you pay — the monthly instalments plus the balloon — equal the amount being financed (the car's price minus your down payment). It bakes in the deferred balloon, the term and the timing of payments into a single comparable figure.

Why does it matter? Two offers can show identical monthlies but very different real rates, because one has a bigger balloon or a longer term. The one with the lower effective APR is genuinely cheaper money, even if the monthly looks the same.

It also lets you benchmark a lease against a plain bank loan. If a lease's effective rate is well above what a bank would charge you, the convenience and bundled extras need to be worth that premium.

You don't need to do the maths by hand. LeaseHub computes the effective APR and the total premium over the cash price for every offer, and flags deals where the rate is high. When you're comparing, sort by effective rate, not by monthly — it's the single most honest way to rank lease offers.