Money factor

Lease Rate

In a leasing agreement, the interest rate. For example, when one leases a car, the bank or leasing company buys the car from the dealer, and lends its use to the driver until he/she pays back the purchase price plus some extra money. The extra money is the interest or lease rate. It is presented as a very small number, say .00220. One arrives at this number by dividing the APR by 2400. In this case, .00220 is the equivalent of a 5.28% interest rate. It is also called the money factor or simply the factor.

Money factor.

A money factor, also called a lease factor, is the finance charge you pay on an automobile lease. Unlike interest rates, which are expressed as a percentage of the amount borrowed, the money factor is usually stated as a decimal.

You can calculate the actual interest rate you're paying by multiplying the decimal by 24. So, for example, if you're quoted a money factor of 0.00297, the rate you're paying is 7.13% (0.00297 x 24 = 0.07128).

You may find that the money factor is non-negotiable.

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