Money Factor
The "interest rate" of a lease, expressed as a small decimal. Multiply by 2400 for APR.
In a lease, the money factor replaces the APR. It's a small decimal like 0.00125 (which equals 3% APR — multiply by 2400 to convert). Dealers will sometimes mark up the money factor without telling you, just like they mark up APR on a loan. ALWAYS ask "what's the buy-rate money factor?" and compare to the rate you're being offered. Tools like Edmunds' lease calculator help spot money factor markups.
01How to spot a marked-up money factor
Many lease quotes do not show the money factor at all. They show a monthly payment. That is the first warning sign. Ask in writing for four numbers: the cap cost, the residual value, the term, and the money factor. Without all four you cannot check the payment.
Then compare the quoted money factor to the lender's base rate for your credit tier that month, often called the buy rate. Captive lenders publish these to dealers each month, and lease forums often post them. If the dealer quotes 0.00200 and the base is 0.00125, the extra 0.00075 is dealer profit.
02A worked example
Say you lease a car with a negotiated cap cost of $38,000 and a residual of $23,200 for 36 months. The depreciation fee is ($38,000 minus $23,200) divided by 36, which is $411.11 a month.
At a money factor of 0.00125 (about 3% APR), the rent charge is ($38,000 plus $23,200) times 0.00125, which is $76.50. Your base payment before tax is $487.61.
At a marked-up 0.00200 (about 4.8% APR), the rent charge is $61,200 times 0.00200, which is $122.40. That is $45.90 more each month, or $1,652.40 over 36 months, for the exact same car at the exact same price.
03How to push back on the money factor
Reply by email: "Please confirm the lender's base money factor for my credit tier and quote the lease at that rate. If the money factor on my quote is higher, I'd like it lowered to base or I'll take the same lease elsewhere." Another dealer can usually write the identical lease through the same lender, so comparison quotes keep everyone honest.
For a deeper walk-through of how the markup is hidden in a payment, see how dealers mark up the money factor.
Some lenders also let you pay refundable security deposits to lower the money factor. Availability varies by brand and changes over time, so ask the dealer or the lender whether it is offered on your program.
04Questions buyers ask
Is a lower money factor always better?
For the same car, cap cost, residual and term, yes. Just do not let a lower money factor distract from a higher cap cost. Check all four numbers together.
Why does my money factor have more decimal places than the example?
Lenders often quote it to five or six decimal places, such as 0.00117. The math is the same. Multiply by 2,400 to get an approximate APR, so 0.00117 is roughly 2.8%.
Does my credit score affect the money factor?
Yes. Lenders set the base rate by credit tier, and the best rates go to the top tier. If the dealer says you do not qualify for the top tier, ask which tier you were placed in and what that tier's base money factor is.