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What is a money factor on a lease?

The money factor is the lease finance charge written as a small decimal. Multiplying it by 2,400 approximates the equivalent annual interest rate, which makes offers comparable. This leasing and financing answer depends on Money factor, Equivalent APR, Credit tier, Marked-up vs. buy rate. Confirm each against the exact vehicle rather than assuming a class-average figure. The sections below break this down further: converting and comparing, buy rate versus marked-up rate, what else drives the payment, converting it to something comparable, +1 more. 3 related follow-up questions are answered separately below, each with its own conditions attached. This site reviews every answer under a configuration-first standard, verified against CFPB auto-loan and lease guidance and linked to related leasing and financing questions for the adjacent decisions this one usually raises. It sits within a leasing and financing library of 8 related questions, held to the same configuration-first standard.

The money factor is how a lease expresses its finance charge. It is a small decimal instead of a percentage, and multiplying it by 2,400 gives an approximate equivalent annual interest rate, which is the only way to compare a lease against a loan or against another lease.

Because it is unfamiliar, it is the lease term most often presented without context. A money factor of 0.00250 sounds like nothing; multiplied by 2,400 it is approximately 6% APR.

Converting and comparing

The conversion is arithmetic and worth doing on every quote.

Equivalent APR ≈ money factor × 2,400
0.00125 ≈ 3% · 0.00250 ≈ 6% · 0.00375 ≈ 9%
Ask for the money factor explicitly; a monthly payment alone conceals it
Compare the quoted factor against the manufacturer's published buy rate where available

Buy rate versus marked-up rate

The finance company sets a base rate for your credit tier, often called the buy rate. A dealer may quote a higher factor, with the difference retained as compensation.

This is legal and common, and it is negotiable. Asking whether the quoted factor is the buy rate is a reasonable question.

What else drives the payment

Money factor is one of several inputs, and a low factor does not by itself make a good lease.

Capitalised cost: the negotiated price the lease finances
Residual value: the contract's projected end-of-term value
Term and mileage allowance
Fees, including acquisition and disposition
Amount due at signing

Converting it to something comparable

Money factor is how a lease expresses its finance charge, written as a small decimal. Multiplying it by 2,400 gives the equivalent annual interest rate, which puts it on the same scale as a loan offer. It is not a Regulation Z APR, which additionally includes fees.

Because it is unfamiliar, it is easy to quote a money factor that would be an obviously poor rate if stated as a percentage. Doing the conversion takes a second and is worth doing on every quote.

Multiply the money factor by 2,400 for an approximate APR
An unfamiliar unit makes a poor rate less obvious
Ask for it explicitly: it is not always volunteered
Compare the converted figure against loan offers

It is negotiable, within limits

Lenders set a base money factor by credit tier, and dealers can mark it up. The marked-up portion is negotiable in the same way a financed rate is.

Ask for the base or buy rate for your credit tier. Manufacturer captive lenders also publish subsidised rates on specific models as incentives, which can be substantially below market.

Dealers can mark up the lender's base money factor
Ask for the buy rate for your credit tier
Captive lenders publish subsidised rates as incentives
A subsidised rate can be well below market

What changes the answer

Money factor
Equivalent APR
Credit tier
Marked-up vs. buy rate

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Common follow-up questions

How do I convert money factor to APR?

Multiply by 2,400: 0.00250 becomes an equivalent annual interest rate of about 6%. Do not try to reach it by moving the decimal point. The Federal Reserve warns specifically against that, and it produces a different and wrong number.

Does a low money factor mean a good lease?

Not on its own. Capitalised cost, residual value, term, mileage allowance, fees and amount due at signing all affect the total. Compare the itemised terms, not any single number.

Is the money factor negotiable?

The dealer markup over the lender's base rate is. Ask for the buy rate for your credit tier, and check for subsidised captive-lender rates.