1. What is Interest from Money Factor?

The Interest from Money Factor calculation determines the total interest paid in a lease agreement based on the capitalized cost, residual value, money factor, and lease term. This is commonly used in vehicle leasing.

2. How Does the Calculator Work?

The calculator uses the following equation:

Where:

• \( Cap \) — Capitalized cost (USD)
• \( Residual \) — Residual value (USD)
• \( MF \) — Money factor (decimal)
• \( Term \) — Lease term (months)

Explanation: The equation calculates the total interest by multiplying the sum of the capitalized cost and residual value by the money factor and lease term.

3. Importance of Interest Calculation

Details: Understanding the interest component of a lease helps consumers compare financing options and make informed decisions about leasing versus buying.

4. Using the Calculator

Tips: Enter all values in the specified units. Cap and Residual should be in USD, Money Factor as a decimal (e.g., 0.0025), and Term in months.

5. Frequently Asked Questions (FAQ)

Q1: How is money factor different from APR?
A: Money factor is a decimal version of the lease's interest rate. To convert to APR, multiply the money factor by 2400.

Q2: What's a good money factor?
A: Generally, the lower the better. Rates vary but 0.0025 or lower is typically considered good.

Q3: Why add cap cost and residual value?
A: This represents the average amount financed over the lease term, on which interest is charged.

Q4: How accurate is this calculation?
A: This provides the total interest but doesn't account for taxes, fees, or payment timing.

Q5: Can I use this for other types of leases?
A: While designed for auto leases, the same principle applies to other asset leases using money factor.