Money Factor

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What is the money factor?

The money factor (also called lease factor, lease fee, or lease money factor) is the financing charge used to calculate the interest portion of monthly lease payments. It’s the lease equivalent of an interest rate but is expressed as a small decimal rather than an annual percentage rate (APR).

Key point:
* A lower money factor means lower finance charges; it’s usually based on your credit score and the leasing company’s pricing.

How the money factor affects lease payments

When you lease a vehicle, monthly payments cover:
* Depreciation (the vehicle’s loss in value over the lease term)
* Interest (the financing charge calculated using the money factor)
* Taxes and fees (sales taxes are typically charged on both depreciation and interest)

The money factor determines the interest portion of each monthly payment.

Converting between money factor and APR

To compare lease pricing to loan APRs:
* APR ≈ money factor × 2,400

Examples:
* Money factor 0.002 → APR ≈ 0.002 × 2400 = 4.8%
* Sometimes dealers show the money factor as “2.0” (a thousandth-style display). In that case:
* Convert to decimal: 2.0 → 0.002, then multiply by 2,400 → 4.8%
* Equivalently, multiply the integer-style value by 2.4 (2.0 × 2.4 = 4.8%)

Calculating money factor from lease data

There are two common ways to find or calculate the money factor:

  1. Direct conversion from APR

  2. If you know the APR used in the lease, money factor ≈ APR / 2400.

  3. From the lease charge (rent charge)

  4. If the dealer gives the total lease charge (the sum of all monthly finance costs), use:
    Money factor = Lease charge / ((Capitalized cost + Residual value) × Lease term)
  5. Definitions:
    • Lease charge = total finance cost over the lease term
    • Capitalized cost = negotiated vehicle price for the lease
    • Residual value = agreed value of the vehicle at lease end
    • Lease term = number of months

Ask the dealer for the “money factor” or the lease charge and the cap cost/residual to verify calculations.

What’s a good or high money factor?

Because it converts to APR, you can judge it like an interest rate:
* A money factor of 0.0025 → APR ≈ 6.0% (considered reasonably good)
* A money factor of 0.0035 → APR ≈ 8.4% (many would view this as high)

What’s “good” depends on your credit score and current market rates.

What affects the money factor?

  • Your credit score — better credit typically yields a lower money factor.
  • The leasing company’s base rates.
  • Dealer markups — some dealers add a spread to the base money factor.
  • Overall market interest rates and promotions.

Can you negotiate the money factor?

Sometimes. Some dealers treat the money factor as non-negotiable; others will align it to market rates or reduce dealer markup if you ask. Always:
* Ask for the base money factor from the leasing company
* Request documentation or a written quote
* Compare offers from multiple dealers or credit unions

Quick takeaways

  • The money factor is the lease’s interest measure; lower is better.
  • Convert to APR by multiplying by 2,400 to compare lease costs to loan rates.
  • It’s influenced by credit, the financing company, and dealer markup — and it can sometimes be negotiated.
  • Ask dealers for the money factor (or the lease charge plus cap cost and residual) to verify the lease pricing.