The fee includes the costs of taxes and depreciation. “When a person leases a car, he or she pays for the amount by which the vehicle’s value depreciates during the period he or she owns it,” Imani Francies, a loan expert with US Insurance Agents, told The Balance in an email. “Depreciation, taxes, and interest are all included in the monthly leasing payments.”
Alternate names: MF, lease factor, lease fee
Dealers may not be upfront about disclosing the money factor, nor are they required to be. For a car loan, the Truth in Lending Act requires that lenders disclose a loan’s annual percentage rate upfront, before you’re obligated to repay the loan. The federal government doesn’t require dealers to disclose the money factor on a lease. “Most dealers won’t tell you until you ask—and most customers aren’t aware that they should—but it’s crucial information since it plays a major role in calculating your monthly payments,” Francies said. You’ll need to request or insist on receiving the money factor, or lease financing rate, in writing from your leasing company or auto dealer. However, companies may not provide it to you, even if you ask. The Edmunds website’s community-forum moderators or community members may be able to supply you with a money factor if you provide certain details about your potential lease. The money factor may depend on the exact vehicle you’re leasing, among other factors, including:
Your credit history and scoreSpecific make, model, and trim of the lease vehicleWaiving various deposits, fees, or paymentsLength of lease periodPaying your lease in one lump sumPaying multiple security deposits
Just like an interest rate on a car loan, the higher your money factor, the higher your monthly payment. The good news is that your money factor could be negotiable. So you can lower your monthly payments by getting your dealer to offer a lower money factor. Ask if any of the variables above could lower your money factor.
Example of the Money Factor
Suppose you’re leasing a car and your lease agreement states a money factor of 0.004. You can convert the money factor into an APR by multiplying it by 2,400: 2,400 x 0.004 = 9.6 So, your APR is 9.6%.
Money Factor vs. Interest Rate
The average money factor in 2021 was 0.001765, according to the state auditor of Georgia, citing research from Edmunds.com. This works out roughly to a 4.2% APR, using the multiplication formula (2,400 x money factor).
