Car Leasing Primer: All About the “Money Factor”

 


If you’re interested in leasing a car, you’ve probably come across the term “money factor.”


Of course, you’ll hear a LOT of confusing words and the meanings may all run together.


So, what exactly is the “money factor?”


Let’s take a look.

Deciphering the money factor

The most bare-bones explanation is that money factor refers to the interest rate of a car lease, though it’s expressed differently.


You may never even see it written, but if you do, it’ll look similar to this: 0.00167 – a very small decimal.


Most people with leased vehicles don’t know what their money factor is and they don’t know to even ask about it when they’re signing their lease agreements.

Money factor affects your payments

It’s important to inquire about the money factor because it plays an integral role in determining your monthly payment.


You may think that the amount you’re paying for your lease refers to the depreciation of the vehicle over the time it’s in your possession.


But, there’s also a finance charge included.


Guess what? That finance charge is the money factor.


It’s money your dealer charges you to lease the vehicle.

How is the money factor calculated?

You can calculate your interest rate by multiplying the money factor by 2,400.


So, using the decimal example above, the 0.00167 money factor would give you a 4% interest rate.


Of course, the interest rate will have an enormous effect on how much you pay each month.

Make an informed decision

Ask your knowledgeable sales representative about the money factor for any vehicles you’re interested in leasing before you sign anything.


At Serra Auto Group, our friendly staff is ready to help you find the vehicle that’s a perfect fit for your needs and your budget.


Come in and experience our People Pleasin’ philosophy in action!


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