What Is a Money Factor?

A money factor is the lease equivalent of an interest rate used to calculate the finance charge portion of your monthly car lease payment. It represents the cost of borrowing the vehicle’s value during the lease term. Unlike a loan APR, a money factor is expressed as a small decimal (e.g., 0.00200), which can be converted to an APR by multiplying by 2,400.

Understanding the money factor helps you compare lease offers and negotiate better terms.

Why the Money Factor Matters

When you lease a car, your monthly payment has two major components:

1. Depreciation Charge: The difference between the vehicle’s selling price and its residual value

2. Finance Charge: Based on the money factor

The money factor determines how much you pay to finance the use of the vehicle, similar to how an interest rate affects a loan payment.

How to Convert a Money Factor to APR

Money factors can be hard to interpret because they’re expressed as a decimal. To compare with loan APRs:

Money Factor × 2,400 ≈ APR

For example:

• Money factor: 0.00150

• APR equivalent: 0.00150 × 2,400 = 3.60%

This makes it easier to compare lease costs with loan interest rates.

Is the Money Factor Negotiable?

• ✔ You can ask for the buy rate (the lowest available money factor your credit qualifies for)

• ✔ Dealers sometimes markup the money factor for profit

• ✘ The base money factor set by the leasing company is not always negotiable

Strong credit scores and multiple dealer quotes improve your negotiation leverage.

What Impacts Your Money Factor?

Your money factor depends on:

• Credit score and credit history: Higher scores typically get lower money factors

• Lease term and residual value

• Market interest rates

• Manufacturer promotions or incentives

Different lenders and manufacturers may offer different money factors for the same vehicle.

Money Factor vs. APR (Key Differences)