Money factor explained — the lease interest rate most buyers never see

Every lease has an interest rate. But unlike a car loan, that rate is never displayed as a percentage — it's hidden inside a tiny decimal called the money factor. Here's what it is, how it works, and how to know if your dealer is marking it up.

What is the money factor?

When you take out a car loan, the interest rate is displayed clearly as an annual percentage rate — 6.9% APR, for example. You know what it is. You can compare it. You can shop for a better one.

Leases work differently. Instead of an APR, leases use something called a money factor — a tiny decimal that represents the same thing, just in a format most people don't recognize. A money factor of 0.00125, for example, looks like nothing. But multiplied by 2,400 it converts to an APR of 3.0%.

The money factor affects your monthly payment just like an interest rate affects a loan payment. A higher money factor means a higher monthly payment, all else being equal. And because most buyers don't know to ask about it — or don't know how to interpret it — dealers have room to mark it up without the buyer noticing.

How money factor affects your monthly payment

On a lease, your monthly payment has two main components: the depreciation charge and the finance charge. The depreciation charge is based on how much value the car loses during your lease term. The finance charge is based on the money factor — it's essentially interest on the value of the car you're using.

The finance charge is calculated by adding the vehicle's capitalized cost (the negotiated price) to the residual value, then multiplying by the money factor. On a $45,000 vehicle with a $27,000 residual and a money factor of 0.00125, the monthly finance charge is:

The buy rate vs the sell rate

Every manufacturer's finance arm — GM Financial, Ford Motor Credit, Hyundai Motor Finance, BMW Financial Services — publishes a base money factor each month for each vehicle. This is called the buy rate. It's the rate the manufacturer is offering directly.

Dealers are allowed to mark this rate up — in most states — and keep the difference as profit. The marked-up rate is called the sell rate. The buyer pays the sell rate. The dealer earns the spread between buy and sell.

This is completely legal. But it's also invisible to the buyer unless they know to ask — or know where to look for the published buy rate.

How to find the published money factor

The manufacturer doesn't publish money factors on their consumer websites — they go through dealer networks. But two resources track and publish current money factors every month:

How to use this at the dealership

Before you go in, look up the current published money factor for the vehicle you want. Write it down. When you're in the finance office, ask the dealer directly:

If they give you a number higher than the published buy rate, you know the rate has been marked up. At that point you can ask them to use the buy rate, or at minimum you understand exactly what you're paying for.

Some dealers will tell you the money factor upfront without being asked. These are usually the dealers worth doing business with. Others will resist disclosing it or quote it in a way that's hard to verify. That tells you something too.

If a dealer is using a subvented money factor — a specially reduced rate offered by the manufacturer as an incentive — they are typically not allowed to mark it up. Subvented rates are often the best lease rates available and are worth asking about specifically.

When a higher money factor might be acceptable

Not every marked-up money factor means you got a bad deal. If the dealer has discounted the vehicle price significantly, reduced the cap cost, or included accessories at no charge, the overall payment might still be excellent even with a slightly higher money factor. What matters is the total monthly payment and what you're getting for it — not any single component in isolation. The money factor is one piece of the puzzle, not the whole picture.

Convert your money factor to APR

Enter the money factor your dealer quoted and see what interest rate it represents.

Frequently asked questions

Skip the money factor game entirely.

When you submit a BidLock™, you name the monthly payment you want. The dealer who accepts it is locked in at that number — regardless of how they get there internally. You don't have to know the money factor if the payment is already agreed on.