What Is the Money Factor?
The money factor is the financing cost used in car leases, equivalent to the interest rate on a loan. It is usually shown as a small decimal such as 0.00250. Because it is hard to compare to familiar percentage rates, dealers and lessees often convert it to and from an annual percentage rate (APR). This calculator converts a known APR into its money factor.
How to Use This Calculator
Enter the APR (annual percentage rate) as a percentage — for example type 6 for 6%. The calculator divides it by 2400 to produce the money factor. It also shows the equivalent APR so you can confirm the conversion both ways.
The Formula Explained
The conversion is simply $$\text{Money Factor} = \frac{\text{APR}}{2400}$$ The 2400 comes from two steps combined: dividing APR by 100 to turn a percentage into a decimal, then dividing by 24 (twice the 12 months in a year, reflecting how lease interest is computed on the sum of the capitalized cost and residual value). To reverse it, multiply the money factor by 2400.
Worked Example
Suppose a lease offer quotes an APR of 6%. $$\text{Money Factor} = \frac{6}{2400} = 0.0025$$ So a 6% APR lease has a money factor of 0.0025 — a "good" lease rate. A money factor of 0.00125 would correspond to an APR of \(0.00125 \times 2400 = 3\%\).
FAQ
Is a lower money factor better? Yes. A lower money factor means a lower financing cost, just like a lower interest rate on a loan.
Why multiply by 2400 and not 1200? Lease interest is charged on the combined capitalized cost plus residual value, which effectively doubles the divisor compared with a standard amortizing loan, giving 2400 instead of 1200.
What is a typical money factor? Money factors commonly range from about 0.0010 (≈2.4% APR) for excellent credit to 0.0040 (≈9.6% APR) or higher.
