Car Lease Money Factor
The “money factor” on your car lease is essentially the interest rate being charged by the financing company. Just like an auto loan or a mortgage, a car lease has an associated interest rate. Also referred to as the “lease factor”, it determines what you’ll pay in the way of finance charges over the life of your lease. Basically, the higher the money factor, the higher the cost of the lease, and vice versa.
So what does this tiny fraction mean, and how can I make more sense of it? Fortunately, it’s easy to convert money factor to a standard interest rate (APR), simply by multiplying the number by 2400, regardless of the lease term.
Let’s look at an example:
Money Factor = .0025
Interest Rate = Money Factor x 2400
Money Factor = Interest Rate / 2400
To find out what the money factor is in terms of interest rate, we simply multiply by 2400 to get a rate of 6.0% in the above example. You can also do the reverse to find out what the money factor is if you already have the interest rate. Simply divide the interest rate by 2400 and you’ll get the money factor.
If the money factor is expressed as a larger number, such as 2.5%, simply multiply by 2.4 instead to get the interest rate.
The money factor is determined by the financing company, and can vary by make, model, year, term, company, etc. It’s also driven by your credit score, and can be bumped higher by the dealer during negotiating, often unbeknown to you.
Keep in mind that the money factor is typically not shown in the lease paperwork, so you’ll have to do your own math to make sure you’re getting the rate you agreed upon with the dealer. Check out my page on what makes up a car lease payment to ensure all the numbers fit properly. Also don’t be afraid to ask the dealer what the money factor is!