Money Factor Calculator

A lease does not quote an interest rate. It quotes a money factor, a small decimal like 0.00125. Multiply the money factor by 2400 and you get the APR equivalent (approx.): 0.00125 × 2400 = 3.00%. Enter a money factor below to see what a dealer's quote really costs, or enter an APR to see the money factor you should be quoted for the same cost of borrowing.

Find the money factor from a quoted payment

The converter above runs both ways when you already have one of the two numbers. This second tool covers the other situation: a dealer quotes a monthly payment but will not state the money factor. Enter the four numbers from the quote and it works the money factor out, then converts it with the same math.

How it works: every lease payment is two parts. The depreciation part is (adjusted cap cost - residual value) divided by the term. Whatever is left of the payment is the finance part, and dividing it by (adjusted cap cost + residual value) gives the money factor. Worked example: on a $32,000 adjusted cap cost with a $19,200 residual over 36 months, the depreciation part is $355.56. A quoted payment of $419.56 leaves a finance part of $64.00, and $64.00 divided by $51,200 is a money factor of 0.00125, an APR equivalent (approx.) of 3.00%. On a 39 month quote with a $41,500 cap cost, a $24,900 residual and a $563.75 payment, the same steps give 0.00208, or 4.99%. If the payment you enter is smaller than the depreciation part alone, the result comes out below zero: those numbers do not describe a real lease, and something on the quote sheet is not what it seems.

The formula

APR equivalent (approx.) = money factor × 2400

money factor = APR ÷ 2400

The conversion comes from how a lease charges for the money. Each month's finance charge, called the rent charge, is (adjusted cap cost + residual value) × money factor. The 2400 turns that monthly charge rate into an annualized percentage: 100 to express it as a percent, 12 for the months in a year, and 2 because the charge is figured on the cap cost plus the residual, which together average out to about twice the amount actually being financed over the lease.

Because it is built on that averaging, the result is an APR equivalent (approx.), not an exact APR. Treat it as the right tool for comparing a lease quote against a loan APR, which is what most people need it for.

Why you should ask for the money factor

Of every number on a lease, the money factor is the one quoted in the way that reveals the least. A loan must disclose its APR. A lease does not have to state a rate at all, and when the money factor is given, it is given as a tiny decimal that looks like nothing: the difference between 0.00208 and 0.00250 is invisible until you convert it, and then it is the difference between an APR equivalent (approx.) of 4.99% and 6.00%.

There is also room to mark it up. The lender sets a base money factor for your credit tier, and the dealer is allowed to quote you a higher one and keep the difference. Nothing about the higher number looks different on the page. Asking for the money factor, in those words, and converting it here against the APR you could borrow at elsewhere is how you find out whether the lease's financing cost is competitive or padded. If the salesperson will not state it, that is information too.

Money factor to APR equivalent (approx.) table

Every 0.00010 of money factor is 0.24% of APR equivalent (approx.). A markup that looks like a rounding error is usually worth real money.

Worked examples

Example 1: reading a dealer's quote. The dealer quotes a money factor of 0.00208. Multiply by 2400: 0.00208 × 2400 = 4.992, an APR equivalent (approx.) of 4.99%. Now you can compare it directly with a loan: if your bank would lend at 4.50%, the lease's financing costs more than the loan's.

Example 2: checking a quote against your own rate. You know you qualify to borrow at 6.00% APR. Divide by 2400: 6.00 ÷ 2400 = 0.00250. That is the money factor a lease should carry to cost the same. If the quote comes back at 0.00290, that is an APR equivalent (approx.) of 6.96%, nearly a full percentage point above your borrowing rate, and the gap is the first thing to negotiate.

Example 3: what a markup costs per month. Take a lease with an adjusted cap cost of $38,000 and a residual of $24,000. The rent charge is (38,000 + 24,000) × money factor. At 0.00208 it is $62,000 × 0.00208 = $128.96 a month. At 0.00250 it is $62,000 × 0.00250 = $155.00 a month. The higher money factor costs $26.04 more every month, $937.44 over a 36-month lease, and buys you nothing.

FAQ

Is the money factor just the APR divided by 2400?
Going the other way, yes: money factor = APR ÷ 2400. Just remember the result in either direction is an APR equivalent (approx.). A lease charges on the average of the cap cost and the residual rather than on a declining loan balance, so no conversion between the two is exact.

What is a good money factor?
Convert it and judge it as a rate. An APR equivalent (approx.) at or below the loan APR you qualify for is competitive. Promotional leases from manufacturers sometimes convert below 2%; standard lender rates for strong credit often land between 4% and 7%.

Can the money factor be negotiated?
The base rate is set by the lender for your credit tier and is not negotiable. Any markup the dealer added on top of it is. Ask for the money factor, convert it, and if it sits well above the rate you expected for your credit, ask for the base rate by name.

Where do I find the money factor on my lease?
It usually is not printed as a money factor. Ask the dealer for it directly, or find the monthly rent charge on the lease agreement: money factor = monthly rent charge ÷ (adjusted cap cost + residual value), and both of those figures are on the paperwork.