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Money Factor Formula:
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The Money Factor is a decimal number that represents the interest rate on a car lease. It is essentially the lease equivalent of the annual percentage rate (APR) on a loan. A lower money factor means lower lease payments.
The calculator uses the Money Factor formula:
Where:
Explanation: The formula converts the annual interest rate percentage into a money factor used to calculate lease payments. The divisor 2400 is a constant that converts the percentage into a decimal factor appropriate for monthly payment calculations.
Details: Understanding and calculating the money factor is crucial for comparing lease offers, negotiating better terms, and understanding the true cost of a vehicle lease. It directly affects your monthly payment amount.
Tips: Enter the annual interest rate as a percentage (e.g., enter 3.5 for 3.5%). The value must be greater than 0.
Q1: What is a good money factor?
A: Money factors vary by credit score, vehicle, and market conditions. Generally, a money factor below 0.0025 (equivalent to 6% APR) is considered good.
Q2: How does money factor affect monthly payments?
A: The money factor is multiplied by the sum of the net capitalized cost and residual value to determine the finance portion of your monthly lease payment.
Q3: Can I negotiate the money factor?
A: Yes, money factors are often negotiable, especially if you have good credit. You can also try to get a lower money factor through multiple dealership quotes.
Q4: What's the difference between money factor and interest rate?
A: Money factor is a decimal representation of the lease interest rate, while APR is a percentage. You can convert money factor to APR by multiplying by 2400.
Q5: Why is 2400 used in the formula?
A: The number 2400 comes from multiplying 24 (to convert annual to monthly) by 100 (to convert percentage to decimal), resulting in 2400 as the conversion factor.