If you’ve been investigating leasing a car, you’ve possibly heard the term “money factor” mentioned. The car-leasing process is full of complicated terms and the money factor term is one of those. So what exactly is the money factor?
The term “money factor” refers to the interest rate attached to a car lease, although it isn’t expressed in the same way. The money factor on a lease is typically written using an extremely small decimal, such as 0.00167 — and sometimes it’s not written at all. Drivers with leased cars rarely know what their money factor is, and they don’t ask about it when signing the lease papers.
The dealer or automaker leasing a car is charging you for the privilege of doing so. Many think leasing just means paying the depreciation of a vehicle, but that’s not the full picture. A finance charge is included in every lease and that finance charge, the money factor, will impact monthly payments.
To calculate your lease’s interest rate, multiply the money factor by 2,400. Mentioned earlier, a 0.00167 money factor translates to a 4 percent interest rate — and a higher monthly payment vs a money factor of, say, 0.0008, which is roughly a 2 percent interest rate.
Always ask about the money factor prior to signing a lease. Beware of a salesperson that says to just move over the money factor’s decimal point to get the interest rate. If the rate you see is higher than you’re expecting, negotiate a lower money factor or step away and go elsewhere to find a better deal.
Hyundai of Corona
2525 Wardlow Rd.
Corona, California 92882
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