Out of all the elements of a lease, the money factor is easily the most negotiable. This is where consumers also find the most frustration because they do not understand money factors. One simple way to translate a money factor into a comparable interest rate is to multiply the money factor by 2400. For example, if you are presented with a money factor of .0025 you can multiply this number by 2400 and get a comparable interest rate of 6%.
This is where your dealer makes his money (well, that and the acquisition fee, but we will address that charge in a moment.)
In many cases the dealer can make more money on your financing than on the sale of your car – and you would never even know it!
Although financing programs differ, most dealers will receive between 1 – 6% of the final sale price of the vehicle as a commission for securing your leasing with a particular bank. So if your vehicle sells for $30,000 and your dealer is getting a full commission, he is earning $1,800 on the value of your lease alone!
When you are discussing financing with the dealer you will also need to keep in mind that the dealer is likely to connect you with the finance company that is in his best interest, not yours. There may be leasing companies who are willing to offer you better rates, but do not pay the dealer as much incentive in commission. Therefore the choices being presented to you are not necessarily the best out there, and most likely not the best for you. Because of this, it is important to do some of your own comparison shopping before visiting the dealer to know what your target rates should be.
A popular site that we like to recommend to customers to compare leasing payments and money factors across multiple lenders: LeaseCompare.com.
This company offers real-time access to money factor, residual and acquisition fee information for free and from multiple lenders. You can also apply for approval and get your lease fulfilled on-line without having to use a dealer in the process.
Be sure to use these calculators to get a good sense for how adjusting the term and sale price can affect your monthly payment. If you are concerned about working with a finance manager in a dealership, these are also great alternatives that allow you to make important finance decisions from the privacy and comfort of your own home, on your own time.
Back to Shopping for Your Lease