The term, money factor, specifies a finance rate for a car lease.

It is similar though not quite the same as interest on a loan, and expressed totally differently.

Money factor, which is sometimes called “lease factor” or simply “factor”, determines how much you’ll pay in finance charges each month during your lease. The higher the money factor, the higher your monthly payment and the more you’ll pay in total finance charges. Therefore, when shopping for a lease, you’ll want to look for the lowest money factor.

Money factor is always expressed as a very small number, such as .00275. To convert to an equivalent annual interest percentage rate (APR), simply multiply by 2400. Therefore, in our example, .00275 multiplied by 2400 yields 6.6% as the equivalent interest APR.
See our Money Factor Calculator.

Sometimes money factor is expressed in a more readable form, such as 2.75, which actually means .00275. This can be confusing to leasing consumers because it appears to be a low interest rate, which it is not. Some car salespeople who don’t understand leasing will mistakenly quote money factor as an interest rate, or vice versa.

Special limited-time lease deals offered by car companies typically have reduced money factors to help create low monthly payments. Some such rates are close to 0% equivalent APR. However, you won’t actually see the money factor in the fine print of the ads or commercials for these deals.

“ The Money Factor you pay in a lease directly depends on your credit score”

When visiting a car dealer for the purpose of leasing, ask them about the money factor on their leases. It is not something that is routinely discussed in lease transactions because most customers don’t know to ask. You cannot know in advance what lease money factor will be used before you lease unless you ask. In fact, money factor is not even disclosed in car lease contracts. It’s not required by law, as APR interest rate is in loan contracts. If you don’t ask, you’ll never know. If a dealer refuses to disclose this important information to you, find another dealer.

The money factor in a car lease is always determined by a customer’s credit score. The best scores get the lowest money factor. Get a Dark Web Scan and your Experian Credit Report for FREE!

When you find out what money factor is being used in your lease you can convert it to interest rate (multiply money factor by 2400) and compare it to national average auto loan rates from Bankrate.com. You should expect to pay about the same rate for your lease. If you have a poor credit score, you may pay a higher money factor, just as you would pay a higher interest rate on a loan.

Watch this short video that explains money factor in leasing:

For a full description of how Money Factor is used in the lease payment formula and in calculating  monthly lease payments, see Car Lease Formula Explained.