1. What is Money Factor?

Money Factor (MF) is the financing charge in a lease agreement, similar to the interest rate on a loan. It's typically expressed as a very small decimal number.

2. How Does the Calculator Work?

The calculator uses the Money Factor formula:

Where:

• \( MF \) — Money Factor (decimal)
• \( APR \) — Annual Percentage Rate (%)

Explanation: The formula converts APR (Annual Percentage Rate) to Money Factor by dividing by 2400 (which is 12 months × 200, accounting for the monthly nature of lease payments).

3. Importance of Money Factor

Details: Money Factor is crucial in lease agreements as it directly affects your monthly payment. A lower money factor means lower financing costs.

4. Using the Calculator

Tips: Enter the APR percentage (e.g., 2.5 for 2.5%). The calculator will convert it to the equivalent Money Factor used in lease calculations.

5. Frequently Asked Questions (FAQ)

Q1: What's a good money factor?
A: Money factors vary but generally below 0.0020 (equivalent to ~4.8% APR) is considered good for prime borrowers.

Q2: How can I convert money factor back to APR?
A: Multiply the money factor by 2400 (e.g., 0.0025 × 2400 = 6% APR).

Q3: Why is 2400 used in the formula?
A: It accounts for converting annual rate (APR) to monthly rate (×12) and adjusting for the way lease payments are calculated (×200).

Q4: Do all leases use money factor?
A: Most vehicle leases in the U.S. use money factor, though some may quote an equivalent APR instead.

Q5: Can I negotiate the money factor?
A: Yes, money factors are often negotiable, especially if you have good credit. Dealers may mark up the buy rate from the lender.