efunda's iPhone version of its online loan, lease, and APR calculators. Choose any variable (loan amount, payment, interest rate, etc.) as the unknown and calculate the result in real-time as other variables are entered. App Store
Money Factor Background: A Mathematical Proof
Notations
C:
The total loan amount. In the case of an auto lease, this is the car price.
F:
The residual value.
r:
The monthly interest rate. If the annual interest rate is R%, the monthly
interest rate r is R/1200.
N:
The term, or the number of months of a lease.
P:
The monthly payment.
The monthly payment formula for a lease is given by:
When and , one can write:
Using the above expression, the average interest paid per month can be written as:
Since , one can rewrite the average interest payment as:
Hence, the Money Factor can be used to conveniently and reliably
estimate the average interest rate on loans.
and 
, one can write:
, one can rewrite the average interest payment as:
