What is a cash factor?

The factor of the lease is the method of presenting the amount of interest from the lease, which has monthly payments. Money factors are also known as monthly financial fees and are used in cases where payments can fluctuate based on the value of asset, such as automatic rental. The investor usually applies the difference between the retail value of the car and the interest payments. This factor can be converted to an annual percentage rate (APR) by multiplying a cash factor by 2,400. If the leasing factor is presented as a factor of 100, for example 2.0 instead of 0.002, it can still be transformed into APR by multiplying 24. There are three basic parts of the car rental. The gross cost of capitalization is the price paid for the car. The residual value, the value of the car, when the rent is over, is the amount that consumers would have to pay if they decide to maintain rented cars.Finally, the money factor is the interest rate that has been built into the rent.

Instead of interest rates for various reasons, money factors are used. If consumers rent cars, lease payments must cover the difference between the capitalized vehicle costs and its residual value. This means that the consumer pays for the difference in the value of when the lease starts and when the car turns back at the end of the lease.

Money Factor is a number that calculates the interest costs associated with the lease; It's usually a long decimal number. Some consumers confuse this for an annual interest rate they will pay. Multipling the cash factor by 2,400, when expressed in decimal form, it converts it to an interest rate. The money factor of 0.00208 would have a real interest rate of about five percent. Choozně various lengths of rent does not affect this formula.

lease payments mustCovering the interest costs associated with a leasing company that lend to consumers, the remaining negotiated capitalized car costs reduce any repayment of the main booster for rent. If the interest rate is divided by 2400, the consumer knows the cash factor of his lease. Money factors are used to calculate the rental size, as well as interest rates are used to search for loan payment. Knowing what this factor is and how to convert it to APR can be a clear financial transaction from the car leasing.