Money Factor

The money factor is a small decimal number used in lease agreements to represent the financing cost, functioning as the lease equivalent of an interest rate. It determines how much the lessee pays in finance charges on top of vehicle depreciation.

To convert a money factor into an approximate annual percentage rate (APR), it is multiplied by 2,400. For example, a money factor of 0.0025 equals roughly a 6% APR.

The money factor, along with the vehicle’s capitalized cost, residual value, and lease term, is a key determinant of the monthly lease payment. Because it is less familiar to consumers than interest rates, some dealerships may present money factors in a way that obscures true costs, making it important for lessees to understand the conversion.

Negotiating a lower money factor can significantly reduce total lease expenses, particularly on higher-priced vehicles. The money factor is influenced by credit score, market interest rates, and leasing company policies.

Being informed about this term empowers consumers to evaluate lease offers accurately and avoid overpaying for financing.