How to Convert a Money Factor to an Interest Rate

Converting a money factor to an interest rate is very important when you are negotiating a lease. The money factor can be converted into an APR percentage. There is a formula commonly used to calculate a money factor into an interest rate.

Instructions

1

Grab your calculator. The money factor formula can be converted as follows:

Money factor = .00625

.00625 x 2400 = 15 (or 15% APR)

Always calculate by 2400. It has nothing to do with the length of the lease. This formula will work for you every time when you convert a money factor into an APR percentage.

2

Watch out for quick talk. Most salesman with brush over the money factor very quickly and mask it as a percentage by calling it 6.25 (using our example money factor). The money factor is not 6.25, it is .00625.

3

Compare your money factor to current APRs. The money factor should not be higher than a regular APR you would be qualified for based on your credit. The money factor is a slick way for dealerships to make money on leases.