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The money factor is a method for determining the financing charges on a lease with monthly payments. The money factor can be translated into the more common annual percentage rate (APR) by multiplying the money factor by 2,400. Money factor is also known as a “lease factor” or a “lease fee.”
To get the money factor, divide the APR on the lease by 24 or 2400 depending on whether it is expressed as a decimal or percent. Lease Term the length of the lease. Most leases run between 2 and 4 years. Residual ValueSometimes called lease-end value.
Negotiate the interest rate (money factor) on the lease to a level appropriate to current market interest rates. Also, when the lease ends you typically have the right to buy the car at the residual value.
A $30,000 vehicle with a 65 percent residual would have a base monthly payment of $292 before taxes, interest and fees. Choosing the vehicle with the higher residual percentage would net a savings of more than $200 per month for a vehicle with the same selling price.
The formula is: Interest Rate = Money Factor x 2400 But neither the money factor nor your interest rate is likely to be present on your contract. You'll have to ask your dealer.
Example. Assume you lease a car for 36 months, with an adjusted cap cost of $35,000. They give you a residual of 54% after 36 months ($18,900).
A lease deal with a money factor of less than. 0017 is a good deal. Anything higher, means less of a good deal. Of course, the best lease deals are made with a combination of low lease PRICE, high RESIDUAL value, and low MONEY FACTOR.
Multiply the base monthly payment by your local tax rate. For example, if a lease on a Mercedes-Benz E-Class has a monthly price of $699 before tax, and your sales tax rate is 6%, the monthly lease tax is $41.94 in addition to the $699 base payment. This makes the total lease payment $740.94.
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