Make Up Numbers Lease For Free

The lower the money factor, the less interest you'll pay over your lease term. Generally, a money factor of 0.0025 and below (the equivalent of 6% APR) is considered a good rate.

I've been reading a lot about the ?1%? rule and the pros and cons of using that figure to determine if a lease is a good deal or not. For those why may not know, it says monthly payments should be about 1% of starting MSRP, so $600 for a $60,000 car would be a ballpark good deal.

Multiplying the money factor by 2,400 will give the equivalent annual percentage rate (APR). A lower money factor is more favorable to a borrower, and the money factor can be negotiated.

The formula is - lease charge divided by the capitalized cost and the revenue cost multiplied by the number of months in the lease term.

Finance Fee = ( Net Cap Cost + Residual ) × Money Factor It's simply a way of calculating the average amount financed without using complicated constant-yield annuity business formulas (for more details, click here). This is the method used by all lease companies and dealers.

A lease rate factor is the regular lease payment as a percentage of the total cost of the leased equipment. Stated another way, if you multiply the lease rate factor by the cost of the leased equipment, you will determine the regular payment amount.

If we consider that the average car lease term in the US is 36 months, the average residual percentage for such leases is around 50 percent but you may see deals in the low 40s or up to 65 percent.

2400 is the product of 3 consecutive conversion (1/2 * 1/12 * 1/100) to convert from an interest rate to a money factor. 6/2400 = Money factor of 0.0025 which can be multiplied against the total amount being borrowed to know what the monthly interest would roughly equal.