Auto Lease Money Factor Calculator

What is the Money Factor?

The money factor is a financial term used in auto leasing that represents the cost of borrowing money over a specific period. It's calculated based on the annual percentage rate (APR) and the number of days in the lease term.

Understanding the money factor helps leaseholders determine the total cost of financing the lease, including interest and fees. It's particularly important when comparing different lease offers or evaluating the true cost of leasing versus buying.

How to Calculate the Money Factor

Calculating the money factor involves several steps that consider the lease terms, interest rate, and the number of days in the lease period. Here's a simplified breakdown of the process:

1. Determine the annual percentage rate (APR) for the lease.
2. Calculate the daily interest rate by dividing the APR by 365 (assuming a 365-day year).
3. Calculate the money factor using the formula provided below.

The money factor is then used to calculate the total lease payment, which includes the capitalized cost of the vehicle, interest, and any fees.

Formula

The money factor (MF) can be calculated using the following formula:

Where:

• APR is the annual percentage rate
• Number of Days is the total number of days in the lease term

This formula accounts for the compounding effect of interest over the lease period.

Example Calculation

Let's walk through an example to illustrate how the money factor is calculated. Suppose you're leasing a car with the following terms:

• Annual Percentage Rate (APR): 8.5%
• Lease Term: 36 months (1,095 days)

Using the formula:

This means the money factor for this lease is approximately 0.258, or 25.8%. This factor is then used to calculate the total lease payment.