Glossary term
Money Factor
The money factor is the finance charge rate on a car lease, written as a small decimal such as 0.00250. Multiply it by 2,400 to get an approximate equivalent APR, so 0.00250 is roughly 6.00%. Along with the capitalized cost and residual value, it determines the rent charge portion of your monthly lease payment.
Updated October 17, 2026 · Editorial Team
How Money Factor works in practice
A lease payment has two main parts. The depreciation charge spreads the drop in value over the term. The rent charge equals the capitalized cost plus the residual value, times the money factor, each month. Adding cost and residual reflects the average balance outstanding.
Lease a car with a $32,000 capitalized cost and a $20,300 residual for 36 months at a money factor of 0.00250. Depreciation is ($32,000 − $20,300) ÷ 36 = $325.00 a month. Rent charge is ($32,000 + $20,300) × 0.00250 = $130.75. The base payment is $455.75 before tax.
Dealers can mark up the money factor, so ask for it in writing and convert it to an APR to compare with loan rates. A lower money factor directly lowers the payment without changing the car's price.
Money Factor: quick questions
How do I convert a money factor to APR?
Multiply it by 2,400. A money factor of 0.00200 is about 4.80% APR.
Can I negotiate the money factor?
Often, yes. Dealers may mark it up from the lender's base rate, so ask and compare.
Does a lower money factor reduce the payment?
Yes. It lowers the rent charge each month while the depreciation charge stays the same.
Sources
- Auto loans — Consumer Financial Protection Bureau. Accessed October 17, 2026.
- Regulation Z (Truth in Lending), 12 CFR Part 1026 — Consumer Financial Protection Bureau. Accessed October 17, 2026.
We cite primary sources: regulators, central-bank data and federal agencies. Worked examples on this page are our own calculations. See our methodology.
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