What is a money factor?

The lease equivalent of an interest rate, expressed as a small decimal. Multiply it by 2,400 to get the annual percentage rate: 0.00225 is 5.4%. The factor of 2,400 is 2 × 12 × 100 — the two comes from the finance charge being levied on the average of the starting and ending values rather than on a declining balance.

Why does the residual matter so much?

Because you pay for the depreciation, which is the gap between what the car costs and what it is worth at the end. A higher residual means less depreciation and a lower payment, which is why a car with a strong resale reputation leases cheaply even at a high price. The residual is set by the leasing company and is not negotiable.

Should I put money down on a lease?

Usually not. It reduces the payment but buys no equity, and if the car is stolen or written off in the first months the insurance settles with the leasing company — the down payment is not returned. Keeping the cash and accepting a higher payment leaves you in a better position if anything goes wrong.

Is leasing cheaper than buying?

Cheaper per month and more expensive per mile driven over the long run, because a lease covers the steepest part of the depreciation curve and never ends in ownership. It wins when the car is a business expense, when the term matches how long you actually keep cars, or when the manufacturer subsidises the residual or the money factor to move stock.

Car Lease Calculator

With negotiated price 38000 usd, cash down and rebates 3000 usd, residual value 58 percent, msrp 41000 usd and 3 more fields, car lease comes to $475.00 — monthly payment. It is reached in 10 steps, the last of which is 443.92167 + 31.074517, and each one is printed on the page with its numbers filled in. The formula is the one published by 12 CFR part 1013 (Regulation M), not an approximation fitted to it.

The monthly lease payment from the price, residual and money factor — and the interest rate that money factor is hiding.

Formula and sources checked 27 August 2026 · How we check

Negotiated price 38000, Cash down and rebates 3000, Residual value 58, MSRP 41000

$475.00

Monthly payment for the example below. Editing a field recomputes the calculator below; this figure holds the answer the page was loaded with.

It is written into the HTML rather than drawn by a script, so a search engine reading this page without running JavaScript still finds an answer.

Negotiated priceusdThe capitalised cost — negotiate this the same way you would a purchase.Cash down and rebatesusdResidual valuepercentSet by the leasing company as a share of MSRP, not of the price you negotiated.MSRPusdThe residual is a percentage of this, which is why a discount off MSRP improves a lease twice over.Money factorA small decimal like 0.00225. Multiply by 2,400 for the equivalent annual rate.TermmonthsSales tax on the paymentpercent

Monthly payment

$475.00

Residual value at the end: 41000 * 58 / 100$23,780
Capitalised cost after money down: max(0, 38000 - 3000)$35,000
Depreciation each month: (35000 - 23780) / 36$311.67
Finance charge each month: (35000 + 23780) * 0.00225$132.26
Payment before tax: 311.66667 + 132.255$443.92
Tax on the payment: 443.92167 * 7 / 100$31.07
Monthly payment: 443.92167 + 31.074517$475.00
The money factor as an annual rate: 0.00225 * 24005.4 %
Total paid over the lease: 474.99618 * 36 + 3000$20,100
Of which finance charge: 132.255 * 36$4,761

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Worked example

A car at $38,000 with $3,000 down, a 58% residual on $41,000 MSRP and a 0.00225 money factor: $312 of depreciation and $132 of finance charge a month, $475 with tax. That money factor is a 5.4% annual rate — the number the lease agreement never prints.

How to work it out yourself

1.Negotiate the capitalised cost first. The residual and the money factor come from the leasing company, but the price does not, and it is the only field fully under your control.
2.Multiply the money factor by 2,400 to see the interest rate. A dealer quoting "point zero zero two two five" is quoting 5.4% APR, and quoting it that way is the point.
3.Treat money down as prepaid depreciation rather than a discount. If the car is written off early, the insurer pays the leasing company and the down payment is gone.

The formula

Residual value at the end41000 * 58 / 100
Capitalised cost after money downmax(0, 38000 - 3000)
Depreciation each month(35000 - 23780) / 36
Finance charge each month(35000 + 23780) * 0.00225
Payment before tax311.66667 + 132.255
Tax on the payment443.92167 * 7 / 100
Monthly payment443.92167 + 31.074517
The money factor as an annual rate0.00225 * 2400
Total paid over the lease474.99618 * 36 + 3000
Of which finance charge132.255 * 36

Source: 12 CFR part 1013 (Regulation M) — Consumer Leasing Act disclosures

Questions people actually ask

What is a money factor?: The lease equivalent of an interest rate, expressed as a small decimal. Multiply it by 2,400 to get the annual percentage rate: 0.00225 is 5.4%. The factor of 2,400 is 2 × 12 × 100 — the two comes from the finance charge being levied on the average of the starting and ending values rather than on a declining balance.
Why does the residual matter so much?: Because you pay for the depreciation, which is the gap between what the car costs and what it is worth at the end. A higher residual means less depreciation and a lower payment, which is why a car with a strong resale reputation leases cheaply even at a high price. The residual is set by the leasing company and is not negotiable.
Should I put money down on a lease?: Usually not. It reduces the payment but buys no equity, and if the car is stolen or written off in the first months the insurance settles with the leasing company — the down payment is not returned. Keeping the cash and accepting a higher payment leaves you in a better position if anything goes wrong.
Is leasing cheaper than buying?: Cheaper per month and more expensive per mile driven over the long run, because a lease covers the steepest part of the depreciation curve and never ends in ownership. It wins when the car is a business expense, when the term matches how long you actually keep cars, or when the manufacturer subsidises the residual or the money factor to move stock.

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