What is the Money Factor?


As discussed previously, the money factor is a fancy word for the interest rate on a lease. To put the money factor in APR terms, you take the money factor of say, .00152, and multiply it by 2400, which equals 3.648. The number in APR terms, then, translates to 3.648%.

It is very important that you learn the “buy rate” of the vehicle you intend to lease. How it works, is the manufacturer buys the rate from a lender for a small number like 1 or 2 percent. The dealership may then mark up that number by anywhere from a half to 3 full points on your contract, potentially costing you thousands of more dollars. Anything beyond the “buy rate” is gross profit for the dealer. The buy rate and the residual values change from month to month, so finding those numbers can sometimes be challenging, and relying on the dealership, to be honest with you, can also present some difficulty.

Some brands will also allow you to put down “Multiple Security Deposits,” or MSD’s. Typically, MSD’s are used by people with less than great credit to entice the lender to help them with a decent rate. What many people don’t realize though, is you can use MSD’s to lower your rate even with great credit. The way it works is you hand the dealer however many security deposits were allowed/made sense. The effect the MSD has on the rate changes from manufacturer to manufacturer, as well as how much each MSD will cost. However, if you put down the maximum MSD’s allowed, you will often end up paying little to no interest over your lease period. So long as the car is returned in good condition at lease end, you also are entitled to that money back. Always beware that you are giving the manufacturer a check, and any time you do that, you open yourself up to not getting it back