Transparent method
The formula
Worked example
Example inputs
How to interpret the result
A money factor converts into an approximate APR through a specific multiplication, but the resulting figure is genuinely an approximation, not an exact APR equivalent, so comparing a lease's money factor against a loan's stated APR requires treating the conversion as a rough guide rather than a precise like-for-like comparison.
Before you rely on it
What to check
Use the actual contracted money factor from the lease paperwork itself for any comparison, and treat the converted APR figure as approximate rather than exact.
The common error
Where people go wrong with lease money factor calculator
Treating the money-factor-to-APR conversion as producing an exact, precise APR figure. It's a useful approximation for comparison purposes, not a mathematically identical equivalent to how loan APR is actually calculated.
Sensitivity evidence
How lease money factor changes the money-factor equivalent APR
| Lease money factor | Money-factor equivalent APR | APR-equivalent money factor | Difference between entered equivalents |
|---|---|---|---|
| 0.002 | 4.8% | 0.0025 | -1.2% |
| 0.0023 | 5.5% | 0.0025 | -0.480% |
| 0.0025worked example | 6.0% | 0.0025 | 0.000% |
| 0.0028 | 6.7% | 0.0025 | 0.720% |
| 0.003 | 7.2% | 0.0025 | 1.2% |
Every input, tested
Which input moves the money-factor equivalent APR most
| Input | Tested from | To | Money-factor equivalent APR at each end | Swing |
|---|---|---|---|---|
| Lease money factor | 0.0023 | 0.0028 | 5.5% to 6.7% | 1.2% (20%) |
| Comparison APR | 5.0% | 7.0% | 6.0% to 6.0% | none |
Step by step
The worked example, input by input
| Input | Value used |
|---|---|
| Lease money factor | 0.0025 |
| Comparison APR | 6.0% |
| Money-factor equivalent APR | 6.0% |
| APR-equivalent money factor | 0.0025 |
| Difference between entered equivalents | 0.000% |
Where the inputs come from
Lease money factor is the small decimal on the lease sheet, such as 0.0025, and the comparison APR is a loan rate you want to compare it with. Dealers sometimes quote only the payment, so ask for the money factor in writing. The lessor's base rate, called the buy rate, can be marked up by the dealer, so ask whether the rate you were quoted is the buy rate. Converting shows how a lease finance charge compares with a loan.
When the result stops applying
The 2400 conversion is an approximation, and the exact APR depends on how the lease is structured and how the payment is calculated. Money factors depend on credit tier and manufacturer incentives, and subsidized leases can be very low. It compares only the finance charge, not the residual or fees.
What to compare it with
See the payment the money factor produces on the auto lease calculator, and compare the lease and purchase on the lease versus buy page. The APR calculator handles loan fees, and the auto loan calculator gives the loan payment. Negotiate the vehicle price first, then the money factor.
People also ask
Frequently asked questions
How do I convert a money factor to an APR?
Multiply it by 2400. A money factor of 0.0025 corresponds to about a 6% annual rate.
Can the money factor be negotiated?
Sometimes. Dealers may mark up the lessor's base money factor, so ask for the buy rate and compare it with what you are offered.
What is a good money factor?
One equivalent to a competitive loan rate for your credit, which changes with the market. Manufacturer subsidies can produce very low factors.