Likewise, if the car dealer quotes a lease APR of 4.8%, a lessee can figure out the money factor by dividing by 2,400. Dividing the interest rate by 2,400 will give you the money factor. Money Factor = .001875. The lease money factor is not the rental amount the lessee pays but the factor used to determine the interest rate she pays. Possibly the most significant period associated with a car lease is the money factor. For instance, if you’re leasing a car with a Money Factor of .0029; a residual value of $12,000; and Capitalized Cost of 23,000 your interest portion is calculated as follows: ($23,000 + $12,000) x .0029 = $101.50. (This … Firstly, the interest rate can be used. Money Factor Calculator Since lessors and dealers don’t need to publish the money factor as part of advertising a lease or even presenting a custom lease quote this information is often not shared. Note: The number used in the conversion from Interest Rate to Money Factor is always 2400 regardless of the length of the lease. In order to calculate your lease’s interest rate, multiply the money factor by 2,400. Example 2 – If you have Money Factor: .001875. Divide by 2400. To convert to an equivalent annual interest percentage rate (APR), simply multiply by 2400. See our Money Factor Calculator. Interest Rate Formula: Interest Rate = Money Factor * 2400. Taxes The money factor is just an elegant word for interest. The Money Factor is basically the interest rate you are leasing the car for. It is equal to the interest rate on a car loan. There are two ways to calculate the money factor.
Or if you have money factory and want APR interest rate, multiply by 2400. You will get some lease money factor, which will be beneficial for you. And delivers the consumer with a measure of the funding cost associated with a lease. If you already have APR interest rate, simply divide by 2400 to get money factor. In the example above, that 0.00167 money factor translates to a 4 percent interest rate — and a higher monthly payment than if you had a money factor of, say, 0.0008, which is roughly a 2 percent interest rate. Therefore, when shopping for a lease, you’ll want to look for the lowest money factor. See the Lease Money Factor page for more details about the Money Factor. Money Factor Formula: Money Factor = Interest Rate / 2400. Money factor is always expressed as a very small number, such as .00275. So finally, to arrive at the monthly amount to be paid for the lease, we need first to calculate the interest payment, which is calculated as follows: ($70,000+$10,000) *0.008 = $640.
The total payment which must be made includes the depreciation part too, and thus it makes $1,000+$640 = $1,640. money factor is calculated by taking the actual bank interest rate of the loan and dividing it by 2400, resulting in a decimal based number. To illustrate, assume that vehicle A is worth $30,000 new off the lot, but in three years' time its value has dropped to around $20,000. A drop in a vehicle's value over time cannot be avoided. For example a car lease with an 7% loan has a money factor … This is the amount of money the equipment owner charges the lessee in financing each month over the course of the lease's term. You can obtain the best SUV lease deals; take the proper help with this article. For example, a lease money factor of 5.4 percent may be applied to a lease, which means the lessee pays a monthly rate of 0.00225. Secondly, the lease charge can be used, in which case the following formula is applied: lease charge / [(capitalized cost + residual value) × term of lease] = money factor. Money factor is the interest rate. Money factor = lease charge/ (CC + RV) x LT. We use the money factor in situations where the monthly costs might fluctuate. Therefore, in our example, .00275 multiplied by 2400 yields 6.6% as the equivalent interest APR. (Yes, it’s always 2400). Example 1 – If you have APR interest rate: 4.5%. This is why depreciation is taken into account when a lessor is establishing a lease contract. A money factor may also be presented as a factor … Money factor, sometimes called "lease factor" or "lease fee," can be translated into the more common annual percentage rate (APR) by multiplying it by 2,400. This is entirely on the basis of the remaining worth of an asset. Multiply by 2400.
The interest portion of your lease is the (Money Factor) x (Captilized Cost + Residual Value).