"She used to pay when we went to the restaurant."
Translation:Elle payait quand nous allions au restaurant.
You don't need the phrase "avoir l'habitude de" if you use a past imperfect: "Elle payait" is sufficient to convey that meaning.
I am a little confused as to when it is appropriate to use "lorsque" and "quand". I had understood it so that "quand" is to be used for questions, and "lorsque" to refer to a point in time (usually past) when recounting a story. Is this correct?
Don't worry too much about the differences in meaning between "quand" and "lorsque". The only grammatical rule to remember is that "lorsque" cannot be used to ask a question.
Indeed lorsque and quand are very similar. It means that there is a time connection between two actions. However lorsque usually implies a stronger connection for me.
Just an example:
- Je regarde la télévision quand je rentre chez moi le soir. => I watch television in the evening after getting back home.
- Je regarde la télévision lorsque je rentre chez moi le soir => I (almost immediately) watch the TV when I enter my place (probably that I fear the TV could have been stolen )
In the case of the restaurant here, lorsque would sound weird because it is not a precise time connection but a general circumstance.
(I hope to be clear enough...)