Money factor: what it is and how to convert it to APR
The money factor is the number a lender uses to calculate the rent charge on a car lease, the lease's version of interest. It's written as a small decimal, such as 0.00200. Multiply it by 2,400 to get a close equivalent of an annual interest rate, so 0.00200 is about 4.8%.
Money factor to yearly rate
Multiply the money factor by 2,400.
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A comparison tool, not a legal annual percentage rate. To go the other way, divide a rate by 2,400: a 6% rate is a money factor of 0.00250.
Key takeaways
The lower the money factor, the lower your payment, and the one on a dealer's quote can be higher than the lender's base rate for your credit, so it pays to ask.
How the money factor sets your rent charge
Each month's rent charge is the capitalized cost plus the residual value, multiplied by the money factor. That's the method the Federal Reserve describes in its leasing guide, and most lenders use it. The rent charge is added to the depreciation charge to make your base payment.
Example (made-up round numbers): capitalized cost $50,000, residual value $30,000, 36 months, money factor 0.00200.
Rent charge: $50,000 plus $30,000 is $80,000, and $80,000 times 0.00200 is $160 a month.
Depreciation charge: $50,000 minus $30,000 is $20,000, and $20,000 divided by 36 is $555.56 a month.
Base payment before tax: $715.56.
In this example, each 0.0001 of money factor is worth $8 a month. A quote at 0.00240 instead of 0.00200 costs $32 a month more, or $1,152 over the lease, before tax.
How to convert a money factor to an interest rate
Money factor to rate: multiply by 2,400. A money factor of 0.00125 is about 3.0%, and 0.00300 is about 7.2%.
Rate to money factor: divide by 2,400. A 6% rate is a money factor of 0.00250.
Why 2,400? The rent charge is applied to the capitalized cost plus the residual, which is about twice the average amount the lender has tied up in the car over the lease. Divide an annual percentage by 12 for months, by 2 for that doubling and by 100 to turn it into a decimal, and you get 2,400.
The result is a comparison tool, not a legal annual percentage rate. Federal Regulation M doesn't let a lessor call a lease rate an "annual percentage rate," and a lessor that shows any percentage rate must add a notice that it may not measure the overall cost of the lease.
Where to find the money factor on your quote or contract
No federal rule requires a lessor to disclose the money factor, and many contracts leave it out. What the contract must show is the rent charge, the adjusted capitalized cost, the residual value and the number of payments. From those you can work it out:
Money factor = total rent charge, divided by the number of payments, divided by (adjusted capitalized cost + residual value)
With the made-up example above: $5,760 of rent charges divided by 36 is $160, and $160 divided by $80,000 is 0.00200. Lenders that calculate rent a slightly different way can produce a small difference, but if your answer is well above the money factor you were quoted, ask why before you sign.
What is a good money factor?
There's no single good number, because it depends on:
Your credit. Lenders set money factors by credit tier. The best rates go to the top tiers, and each step down costs more.
Whether the carmaker is supporting that lease. Carmakers' finance companies sometimes cut the money factor on particular models for a limited time, so one brand can have very different rates on two of its models.
Interest rates in general. When loan rates rise, money factors follow.
A useful test: convert the money factor to a rate and compare it with what your bank or credit union would charge you for a new-car loan of similar length. If the lease rate is well above that, either the carmaker isn't supporting that model right now or the rate has been marked up.
Can you negotiate the money factor?
You can negotiate a markup, not the lender's base rate. Lenders set a base money factor for each credit tier, often called the buy rate. On car loans, the CFPB has described lender policies that let a dealer charge more than the lender's buy rate and keep part of the difference as compensation. Ask the same question on a lease: what is the lender's base money factor for my credit tier, and is this quote at that number? If it's higher, ask for the base rate and get it in writing. The CFPB lists the money factor among the lease terms consumers commonly negotiate.
Better credit can move you into a better tier; see leasing with bad credit and leasing with a co-signer.
What a higher money factor costs
A small decimal moves the payment. Ask if the quote is at the base rate.
Rent charge on a $50,000 capitalized cost and a $30,000 residual, 36 months.
$1,152 more over the lease, before tax.
Made-up round numbers. In this example each 0.0001 of money factor is worth $8 a month. You can negotiate a markup, not the lender's base rate.
The money factor in California
The rent charge is taxed. California taxes the whole monthly payment, and the rent charge is part of it, so a marked-up money factor costs you the markup plus sales tax on it. Interest on a car loan, by contrast, isn't subject to sales tax when it's stated separately.
California's cap on dealer rate markups is written for purchases. Civil Code section 2982.10 limits what a dealer can be paid out of the finance charge on a conditional sale contract, the contract used for a financed purchase. On a lease, your protection is asking for the base money factor.
Misrepresenting lease costs is prohibited. From October 1, 2026, the CARS Act makes it a violation for a dealer to misrepresent the costs or terms of leasing a vehicle.
What to ask the dealer
What money factor is this quote using?
Is that the lender's base rate for my credit tier, and which tier am I in?
What capitalized cost and residual value is the payment based on? You need all three numbers to check it.
Is there a lower rate on a different term?
Can you write the money factor on the quote?
You can also run a dealer quote through Check my quote or follow how to read a lease quote. Negotiating tactics are in how to negotiate a car lease, and the other two numbers in the payment are explained in capitalized cost and residual value.
How 021 helps
Send us a complete dealer quote through Beat my deal, and we'll beat it or tell you it's already a good deal. If you're starting from scratch, several dealers quote the same car and you get one written quote with the payment, drive-off, term, miles, taxes, fees and our fee.
Before you agree to a payment
What to ask the dealer.
A dealer's quote can use a money factor higher than the lender's base rate for your credit. It pays to ask.
- What money factor is this quote using?Multiply it by 2,400 to compare with a loan rate.
- Is that the lender's base rate for my credit tier?Ask which tier you are in. If the quote is higher, ask for the base rate.
- Which capitalized cost and residual is it based on?You need all three numbers to check the payment.
- Is there a lower rate on a different term?
- Can you write the money factor on the quote?No federal rule requires a lessor to disclose it, and many contracts leave it out.
Common questions
What is a good money factor on a car lease?
How do you convert a money factor to APR?
Is the money factor the same as an interest rate?
Can I negotiate the money factor on a lease?
Why do you multiply the money factor by 2,400?
Does the money factor show on my lease contract?
021 Auto Leasing is a licensed California autobroker (license #82402). All new cars arranged for sale are subject to price and availability from the selling franchised new car dealer.