Last updated July 18, 2026
Decoding the money factor
A money factor of 0.00208 does not look like anything until you multiply it by 2400, which gives approximately 5 percent, the APR-equivalent rate the lease is quietly charging. Dealers aren't required in every state to volunteer this number in plain rate form, which is part of why leases can feel harder to shop than loans. Once you have it converted, comparing lease offers works the same way comparing loan rates does: lower is cheaper, all else equal.
What makes up the payment
A lease payment is two things stacked together, plus tax. Depreciation is the value the car loses while you have it: cap cost minus any down payment minus the residual value, spread over the term. The finance charge is the cost of borrowing against that depreciation, found by multiplying the adjusted cap cost plus the residual by the money factor. Add the two, then apply sales tax on top.
Run the numbers once, by hand
Take a $35,000 car with a $21,000 residual, $2,000 down, a 36-month term, a 5 percent APR, and 7 percent sales tax. The adjusted cap cost is price minus down payment, $33,000. Monthly depreciation is (33,000 minus 21,000) divided by 36, or $333.33. The money factor is 5 divided by 2400, about 0.002083. The finance charge is (33,000 plus 21,000) times 0.002083, or $112.50. Add depreciation and finance charge for $445.83 before tax; apply 7 percent tax and the payment lands near $477.04. Over 36 months plus the $2,000 down, total cost runs about $19,173.
Lease versus buy, at a glance
| Factor | Lease | Loan (buy) |
|---|---|---|
| Monthly payment | Usually lower | Usually higher |
| You own the car | No, return at end | Yes, once paid off |
| Mileage limits | Yes, fees over the cap | None |
| Pays for | Depreciation plus finance | The whole car plus interest |
A lease only pays for the value the car loses while you're driving it, which is why the monthly number usually undercuts a loan on the same vehicle. The tradeoff is that the car goes back at the end unless you buy it out at the residual price.
The fine print that changes the real cost
Mileage caps carry a per-mile penalty, commonly 15 to 25 cents, for every mile over the limit, so an inaccurate estimate of your own driving habits can turn a cheap-looking lease expensive at turn-in. The Federal Trade Commission also flags large down payments on leases as a real risk: if the car is totaled or stolen early in the term, that money is often gone, which is why many lessees put little or nothing down and accept a slightly higher monthly number instead.
Sources: FTC on vehicle leasing, CFPB Auto Loans.
Related calculators
- Auto Loan Calculator, for buying instead of leasing
- APR Calculator, if you're financing the buyout at lease end