Lease financing formula
How the money factor sets the rent charge
The money factor is the decimal used in a common vehicle-lease payment formula. Multiply the adjusted capitalized cost plus residual value by the money factor to estimate the monthly rent charge. The base payment adds monthly depreciation.
Southeast Toyota Finance publishes these lease-payment formulas. CFPB Regulation M describes the rent charge as the amount charged in addition to depreciation and amortized amounts, and the base periodic payment as their combined total. See Southeast Toyota Finance's calculation guide and CFPB Regulation M § 1013.4.
Four ways to calculate
Use the value shown on your quote
- Money factor: enter the decimal to calculate the monthly and total rent charge.
- APR-style rate: divide the entered percentage by 2,400 to obtain the comparison money factor.
- Total rent charge: solve backward using the adjusted capitalized cost, residual value and term.
- Base payment: subtract monthly depreciation from the pre-tax base payment, then solve the factor from the remaining rent charge.
Use the base payment before sales tax and other periodic charges. A payment advertised online may combine different items and is not enough to recover the money factor reliably.
Rate conversion
Money factor × 2,400 is only an approximate comparison rate
A factor of 0.00200 corresponds to a 4.80% APR-style rate using the common conversion shortcut. This helps compare the financing component across lease quotes, but it is not a disclosed loan APR. A lease does not amortize principal like an auto loan, and Regulation M uses lease-specific disclosures such as rent charge and total base periodic payments.
Worked example
A 36-month quote with a $12,000 depreciation amount
Suppose adjusted capitalized cost is $36,000, residual value is $24,000 and the term is 36 months. Monthly depreciation is $333.33. With a 0.00200 money factor, the monthly rent charge is $120, so the pre-tax base payment is $453.33. Over 36 months, the rent charge totals $4,320.
Entering the same $4,320 total rent charge in the reverse mode returns a 0.00200 money factor. Small differences can occur when a lease worksheet rounds its displayed monthly amounts.
Read the disclosure
Where to find the inputs
Use the adjusted capitalized cost and residual value from the lease disclosure or worksheet. The adjusted capitalized cost is the amount used to calculate the base payment after capitalized-cost reductions. The residual value is the end-of-term value used in that same calculation.
Regulation M also requires disclosure of depreciation and amortized amounts, rent charge, total base periodic payments and the number of lease payments. Those values can be more useful than trying to infer financing cost from a promotional monthly payment.
Official definitions and disclosure requirements: Consumer Financial Protection Bureau.
Quote comparison
Do not evaluate the money factor alone
A lower factor can still accompany a more expensive lease if the negotiated vehicle price is higher, the residual is lower, fees are capitalized or more cash is due at signing. Compare the complete economics: adjusted capitalized cost, term, residual value, rent charge, taxes, upfront amount, mileage allowance and end-of-lease charges.
A refundable security deposit is different from a nonrefundable capitalized-cost reduction. Keep those amounts separate when comparing how much cash is committed.
Educational estimate only, not a lease disclosure or financial advice. Verify every term with the lessor's written worksheet and contract.