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Money factor is not interest or APR..... Posted by Mike Lynch [Email] ![]() ![]() In Reply to: The money factor.............., andy ![]() |
Interest, quoted by the term Annual Percentage Rate, is normally used for an installment loan with a declining balance. This term is strictly defined by consumer law.
GM advertises the 0% for 60 months as $16.67 per $1,000 borrowed. Mercedes advertises 2.9% for 36 months as $29.03 per $1,000 borrowed. That's a couple of places you hear the APR quoted as a monthly rate or per $1,000 financed.
The money factor of a lease is what your multiply the total of the residual added to the net captialized cost to determine the monthly rental charge of a level yield lease. It is not an APR.
One generally accepted conversrion factor is the level yield lease rate times 2400. Typical standard lease rates run around .00255 times 2,400 = 6.12% equivalent. I've often wondered if the "2,400 conversion" factor is really true and if so, is it true for all terms or just one term in particular?
Amazingly Saab has some 24 month lease rates at .00001 or the equivalent of only 24/1,000ths of a percentage point, 0.024%, virtually zero, just a place holder really.
A salesperson not getting pinned down by semantics of you questions may be giving the most honest answer.
posted by 63.197.222...
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