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Money Factor Formula:
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The Money Factor is a decimal number that represents the interest rate component in equipment leasing. It is calculated by dividing the annual interest rate by 2400, converting the percentage rate to a decimal factor used in lease payment calculations.
The calculator uses the Money Factor formula:
Where:
Explanation: The money factor represents the leasing company's cost of funds and is a key component in calculating monthly lease payments for equipment.
Details: Accurate money factor calculation is essential for determining fair lease rates, comparing different leasing offers, and understanding the true cost of equipment financing.
Tips: Enter the annual interest rate as a percentage (e.g., enter 6 for 6%). The calculator will convert it to the corresponding money factor used in lease calculations.
Q1: Why divide by 2400 specifically?
A: The divisor 2400 converts an annual percentage rate to a decimal money factor that can be used directly in lease payment formulas (2400 = 24 * 100, accounting for months and percentage conversion).
Q2: What is a typical money factor range?
A: Money factors typically range from 0.001 to 0.004, which corresponds to annual interest rates of 2.4% to 9.6%.
Q3: How does money factor affect lease payments?
A: Higher money factors result in higher monthly lease payments, as they represent a higher cost of borrowing for the leasing company.
Q4: Can I negotiate the money factor?
A: Yes, money factors are often negotiable, especially for customers with strong credit profiles and large lease amounts.
Q5: How does money factor differ from APR?
A: Money factor is a decimal representation of the lease rate, while APR (Annual Percentage Rate) is the equivalent interest rate expressed as a percentage.