Money Factor

The money factor is how leases quote the cost of borrowing, and it is deliberately obscure. Instead of stating an interest rate, a lease lists a tiny decimal like 0.00125. To translate it into a familiar annual percentage rate, multiply by 2,400: that example works out to roughly 3 percent. Knowing the trick lets you compare a lease offer to ordinary loan rates and spot when a dealer has marked it up.

Along with the residual value and the negotiated price of the car, the money factor sets your monthly lease payment. A lower money factor means less interest cost over the lease. Like a loan rate, it depends heavily on your credit score, and it is negotiable even though dealers rarely volunteer that. Our buy versus lease playbook shows how the money factor, residual value, and price combine to decide whether leasing or buying wins.