How to Calculate Payment Factor

Money factor is important for car loans.

When you lease property, such as with a car lease, you need to repay more money than you use the asset. To figure how much you are going to owe each month, you need to calculate the money factor on the lease. You'll want to have the smallest interest rate possible for the financing factor. The smaller the interest rate, the less money you need to payback.

Basic Formula

Step 1

Determine the lease charge from your lease contract.

Step 2

Find the term of the loan on the contract.

Step 3

Divide the lease charge by the term of the loan.

Specific Formula

Step 1

Add your net capital costs to the residual value of the asset. The net capital costs are the amounts you are paying for the lease. The residual value is the amount the asset is worth at the end of the period.

Step 2

Multiply the amounts from Step 1 by the period the lease covers. This is your financing factor.

Step 3

Divide the lease charge, from your lease contract, by the financing factor from Step 2 to find the payment factor.

references