Money Factor
Also known as: Lease Rate, MF, Lease Interest Rate
A money factor is the interest rate on a car lease expressed as a small decimal. Multiply the money factor by 2,400 to convert it to an approximate APR.
How Money Factor Works
The money factor determines how much interest you pay on a lease. A money factor of 0.00125 equals approximately 3.0% APR (0.00125 x 2,400 = 3.0%). Lower money factors mean lower monthly payments. Money factors are set by the manufacturer's captive finance company (e.g., Toyota Financial Services, BMW Financial) and can sometimes be marked up by the dealer — just like a loan APR. Always ask the dealer for the "buy rate" money factor to ensure no markup.
Example
A money factor of 0.00167 on a $40,000 vehicle with 60% residual: APR equivalent = 0.00167 x 2,400 = 4.0%. Monthly finance charge = ($40,000 + $24,000) x 0.00167 = $106.88.
Frequently Asked Questions
What is a good money factor for a car lease?
A good money factor is below 0.00125 (3.0% APR equivalent). Excellent money factors from subvented manufacturer programs can be as low as 0.00050 (1.2% APR). Anything above 0.00250 (6.0% APR) is high and should be questioned.
How do you convert money factor to APR?
Multiply the money factor by 2,400. For example: 0.00125 x 2,400 = 3.0% APR. To convert APR back to money factor, divide by 2,400: 3.0% / 2,400 = 0.00125.
Can you negotiate the money factor on a lease?
Yes. Dealers can mark up the money factor just like a loan APR. Ask for the "buy rate" — the base rate from the manufacturer's finance company. If the dealer quotes a higher money factor, negotiate it down to the buy rate.
Related Lease Terms
Residual value is the projected worth of a leased vehicle at the end of the lease term, expressed as a percentage of MSRP.
Capitalized CostThe capitalized cost is the total amount being financed in a lease — the lease equivalent of a purchase price.
Lease CashLease cash is a manufacturer incentive that reduces the capitalized cost of a lease, lowering the monthly payment.
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