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Re: What do u mean by the "money factor"? (n/m)
Posted by Michael Vogt [Email] (more from Michael Vogt) on Fri, 15 Mar 2002 21:01:53
In Reply to: What do u mean by the "money factor"? (n/m), AVi, Fri, 15 Mar 2002 15:39:55
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This is probably more than you wanted to know, but "money factor" is used to calculate the "lease service charge", which is virtually identical to interest on a conventional finance.
Lease payments consist of depreciation (similar to principal) and the above mentioned lease service charge. Some states then tax the payment.
Here is how you do the payment calculation:
MSRP = usually the sticker price, but SOME banks will allow the dealer to increase for "hard adds" such as a CD changer, alloy wheels, etc. (something tangible that would add to the market value of the car)
NetCap = the price paid for the vehicle less the down payment
Residual = the agreed-to future value of the vehicle, usually a expressed as a percentage of MSRP
Depreciation = (NetCap - Residual) / Number of Months
Lease Service Charge = (NetCap + Residual) * MoneyFactor
So, assuming you lease a car with a $40,000 MSRP for 36 months at a money factor of 0.0030 and a residual of 50%, and you negotiate a $10,000 discount, your payment would be:
Depreciation: $10,000 / 36 = $277.78
Service Chg: $50,000 * 0.0030 = $150.00
Payment: $427.78 + tax where applicable
The money factor of 0.0030 will be commonly referred to as "3.0". If you do a discounted cash flow (remembering lease payments are made in the beginning of the period unlike conventional finance contracts), you will note that this is equivalent to a little over a 7.0% APR. As a general rule, you can convert money factors to interest rates by multiplying by 2400 or 2.4 depending on how the money factor is quoted. This is not 100% accurate, but it is good enough. Saab money factors have usually equated to less than 1.0% APR.
Also note that not all leasing companies use money factors. Ford Motor Credit actually uses interest rates and they can be directly compared to conventional financing rates.
Happy SAABing!
Michael
posted by 64.174.2...
Posts in this Thread:
- Lease Offer, Mike, Fri, 15 Mar 2002 09:11:30
- Re: Lease Offer, Nemo, Mon, 18 Mar 2002 03:02:24
- Talked to my dealer today, Pat, Sun, 17 Mar 2002 01:07:14
- See List of Variables-Terms, Mike Lynch , Sat, 16 Mar 2002 13:51:08
- That's fantastic, where? What's the buyout?, DT, Fri, 15 Mar 2002 13:48:04
- Re: Lease Offer, Jack, Fri, 15 Mar 2002 11:55:24
- Re: Lease Offer, mike, Fri, 15 Mar 2002 09:50:10
- Re: Lease Offer, chirs, Fri, 15 Mar 2002 09:21:25
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