Question

What Is a Money Factor on a Lease?

Written by JaredReviewed by JaredLast reviewed 2026-08-07

What is a money factor?

The money factor is the interest rate hiding in your lease payment, written as a small decimal like 0.00275 instead of a percentage. Multiply it by 2,400 and you get the approximate annual rate: 0.00275 times 2,400 is 6.60%. That is the whole trick. Dealers and lease contracts use the decimal form, which keeps most shoppers from recognizing that they are looking at an interest rate at all.

The conversion is approximate rather than exact. A loan charges interest on a balance that falls every month. A lease charges interest on the adjusted capitalized cost and the residual value added together, every month of the term. The 2,400 shortcut translates between the two conventions closely enough to compare a lease against a loan rate.

For context, new-vehicle loans averaged 6.39% APR in Q1 2026, per Experian's State of the Automotive Finance Market. That converts to about a 0.00266 money factor. A manufacturer subsidizing leases on a slow-selling model can price well below that. A dealer marking up the factor on an unwary shopper can price well above it.

How does the money factor set your payment?

The money factor produces the rent charge, the finance portion of your monthly payment. The formula is (adjusted cap cost + residual value) x money factor. The other portion is depreciation: the gap between what you pay for the car and what it is predicted to be worth at lease end (the residual value), divided by the number of months.

Here is a hypothetical 36-month lease, computed rather than estimated. The car has a $32,000 MSRP, a negotiated $30,000 selling price, and a 60% residual, meaning the leasing company predicts it will be worth $19,200 at lease end.

Note what the rent charge multiplies: cap cost plus residual, $49,200 in this example, more than the price of the car. That is why a seemingly tiny decimal moves the payment more than people expect, and why the money factor deserves the same attention as the selling price.

Can dealers mark up the money factor?

Yes. The leasing company sets a buy rate, and most captive finance arms allow the dealer to raise it within a cap and keep the difference. Some dealer websites deny this exists. It exists, and it is one of the quietest profit centers in a lease deal, because the payment only moves by a few dollars per tick.

Run the same hypothetical lease at a marked-up 0.00335 factor, about 8.04% APR:

The markup costs $29.52 a month, $1,063 over the term, on a payment that still looks normal. Nothing on the contract says "markup." The defense is simple: ask what the buy rate is for your credit tier, and ask whether the quoted factor matches it. Dealers who are not marking it up will tell you.

How do you find out your money factor?

Ask for it in writing before you negotiate anything else. The money factor is usually not printed on the lease contract, because federal lease disclosure rules require the rent charge in dollars rather than the rate that produced it.

If a dealer will not say, you can work backward from the contract's own numbers: divide the monthly rent charge by the sum of the adjusted cap cost and the residual value. Both figures appear on the federal disclosure page of the lease. If the result is far above the going loan-rate equivalent, you have found where the deal got expensive.

The money factor is one of the seven numbers that fully describe a lease deal: MSRP, selling price, money factor, residual, incentives, amount due at signing, and monthly payment. Get all seven before you compare offers. Current advertised lease examples, with their programs and expiry dates, are on our live board.

Is a low money factor always a good deal?

No, and this is where lease shopping goes wrong. A dealer can quote the buy rate with no markup and still overcharge you on the selling price, or bury an old loan's balance in the cap cost. The money factor is one input, not a verdict. A 0.00195 factor on an inflated price loses to a 0.00275 factor on a well-negotiated one.

And sometimes the honest answer is that no money factor makes a lease right. If you drive well over the mileage allowance every year, or you keep cars for a decade, buying almost always costs less in total. A lease payment is rent on depreciation. Rent is only a good deal when the terms of the whole arrangement fit how you actually drive.