Money Factor Formula

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.

Glossary

Units » Time » Month (sidereal)

Discover how to choose the right 3D printer for your needs and the key performance attributes to consider.

Guide for high quality and cost-effective plastic injection molding.

A white paper to assist in the evaluation of 3D scanning hardware solutions.

Direct Metal Laser Sintering (DMLS) 3D printing for parts with reduced cost and little waste.