# What Is Money Factor on a Lease?

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Leasing a car isn't as different from buying one as you might think. While you're only going to be paying for the portion of the car that you use, you're still making monthly payments for your car. You're also still paying interest on what you borrow -- it just isn't called interest. It's called a money factor instead.

## Lease Money Factors

While many manufacturers advertise their car loan rates, lease money factors are harder to find. When you can find one, it's typically a very small number like 0.0025. To get lease factors, just ask your lender or the finance office at the dealer. Once you get one, multiply it by 2,400 to find the interest rate that it represents. For example, a 0.0025 money factor represents a 6-percent interest rate.

## Two Other Numbers

To understand how your money factor affects your lease, you need to understand two other numbers -- your net capitalized cost and your residual. When you lease a car, you only pay for the amount of the car that you use while you have it. If you buy a \$28,000 car and you use 53.57 percent of it, the car would have approximately \$13,000 in value left over at the end of your lease. That's the residual. Your net capitalized cost is the amount of money that the car costs for the purpose of the lease. If the car has a \$28,000 sticker price and you get a \$2,000 rebate and put \$2,000 down, its net capitalized cost would be \$24,000.