The formula to calculate the money factor is:
\[ MF = \frac{APR}{2400} \]
Where:
Money factor refers to the cost of financing a lease or loan for a vehicle. It is essentially the interest rate applied to the amount being financed. Money factor is important because it directly affects the monthly payment and overall cost of borrowing money for a vehicle. A lower money factor means lower monthly payments and less interest paid over the life of the lease or loan. It is a crucial factor to consider when negotiating lease or loan terms, as a lower money factor can save a significant amount of money in the long run.
Let's assume the following values:
Step 1: Calculate the money factor using the formula:
\[ MF = \frac{3}{2400} = 0.00125 \]
The Money Factor (MF) is 0.00125.
