Money Factor Calculator
Calculate money factors for auto leases and convert between money factors and interest rates. Understand lease financing costs and compare lease vs. purchase options.
Money Factor Analysis
Lease Payment Breakdown
Money Factor Ranges
Excellent (0.0001-0.001): 0.24-2.4% APR
Good (0.001-0.002): 2.4-4.8% APR
Fair (0.002-0.003): 4.8-7.2% APR
Note: Lower money factor = lower cost
Understanding Money Factor
Money factor is the financing rate used in auto leasing calculations. It's similar to an interest rate but expressed as a small decimal. Understanding money factor helps you calculate lease payments and compare lease offers.
Money Factor Formula
Money factor is typically calculated as:
Money Factor = Interest Rate ÷ 2400
Or: Money Factor = (APR ÷ 2) ÷ 100
Converting Money Factor to APR
Convert money factor to annual percentage rate:
APR = Money Factor × 2400
Or: APR = (Money Factor × 2) × 100
Lease Payment Calculation
Monthly lease payments consist of two main components: depreciation and finance charges.
Monthly Depreciation:
Depreciation = (Capitalized Cost - Residual Value) ÷ Lease Term
Monthly Finance Charge:
Finance Charge = (Capitalized Cost + Residual Value) × Money Factor
Money Factor Ranges
| Money Factor | Equivalent APR | Rating |
|---|---|---|
| 0.0001 - 0.0010 | 0.24% - 2.4% | Excellent |
| 0.0010 - 0.0020 | 2.4% - 4.8% | Good |
| 0.0020 - 0.0030 | 4.8% - 7.2% | Fair |
| 0.0030 - 0.0040 | 7.2% - 9.6% | High |
| 0.0040+ | 9.6%+ | Very High |
Negotiating Money Factor
- Research Market Rates: Know current money factor ranges
- Credit Score Impact: Better credit gets lower money factors
- Dealer Incentives: Some dealers offer money factor concessions
- Compare Offers: Get quotes from multiple dealers
- Residual Value: Higher residual can offset higher money factor
Lease vs. Purchase Considerations
- Lower Monthly Payments: Leasing typically costs less per month
- No Ownership: You don't own the vehicle at end of lease
- Mileage Limits: Excess mileage charges apply
- Depreciation: You don't bear the full depreciation cost
- Tax Benefits: Leasing may offer tax advantages
Common Money Factor Mistakes
- Ignoring Total Cost: Focus only on monthly payment
- Not Comparing APR: Money factor alone doesn't tell the full story
- Forgetting Fees: Drive-off fees and other costs add up
- Mileage Overage: Excess mileage can make leasing expensive
- Early Termination: Breaking a lease can be very costly
Money Factor Trends
Money factors have generally declined over time due to lower interest rates and competitive leasing market.
- 2020-2023: Money factors ranged from 0.001 to 0.003 (2.4% to 7.2% APR)
- Economic Impact: Higher interest rates increase money factors
- Manufacturer Incentives: Can reduce effective money factor
- Regional Variations: Money factors vary by location and dealer
Tip: Money factor is a critical component of lease pricing. Always convert it to APR for easy comparison with purchase financing rates. A lower money factor means lower lease payments. Negotiate both the money factor and residual value to get the best lease deal.