My understanding so far is that the MF is partially set by the region or location and also the car model.
Is it impacted by the buyers credit score?
Can it be negotiated with the dealer?
Does the dealer typically have flexibility with the MF?
Thanks
You’re a little off. Money factor is set by the financial captive or bank that’s financing a lease. It is the “base” money factor or the “buy rate.”
Dealers can only inflate it by a maximum amount predetermined by the captive. They can not reduce the money factor lower than the buy rate.
The only way to reduce money factor is to use multiple security deposits. Each captive sets a maximum amount of MSDs applicable to a lease contract. One bank might allow you to use a maximum of 10, while another would set it at 7. Just an example.
Each MSD may also only reduce the money factor by a set amount established by the bank. For example, one MSD may be worth only .0005 reduction.
A bank may have multiple tiers of money factors based on your credit score. Such as tier 1, tier 2, or tier 3. Some banks call it something else, but it’s essentially the same thing and based on a range of the fico score that they use. This may vary by state as some states have specific rules regarding which fico scores banks have to use for specific types of loans.
Hope this helps.
@StingerTT So what your saying is as long as a customer is approved, they qualify for the base MF?
Not at all. A lessee may be approved for Tier 1 at the buy rate, or, they may be approved at a sort of “subprime” tier which will be higher rate. There may be two or three or more tiers. But once one’s creditworthiness is deemed “too” subprime, they’ll not be approved for a lease at all.
It’s crucial to establish the buy rate when shopping for all models being considered, as some brands have multiple MF based on model, while some, like BMW have a single rate across the board.
Rule of thumb is that for marques with multiple MF based on model, the “sexier” the model, the higher the rate. An AMG model will almost always have a higher MF than a standard C Class, for example.
The bank and the OEM actually work in tandem to determine the money factor and RV. An independent third party calculates what they think the car will actually be worth in three years and the bank or finance arm will come up with an interest rate. For example if someone like Mazda uses a third party (ie Chase), they can buy down the money factor or buy up the residual to inflate it or decrease (the money factor). The limited edition models often have dumpy rv and mf because they simply don’t need the support from the OEM. Most people don’t know that the MF and RV are often times heavily subsidized by the OEM.
Don’t tell me that, tell the OP! Haha
Hi kinda new at this. Trying to figure out how can I get residual and money factor info from the dealer. I am looking to lease 2020 Pathfinder 36months 12k miles. Any help would be appreciated. I am in New Jersey
Having current, accurate information for residual value, money factor, and incentives is important in understanding your deal. As such, going directly to a source that has access to that data from the captive banks is your best option. The forums at Edmunds are where we go to get that information, as they have direct access to it from the captive banks. You’ll want to post of the model specific thread for the vehicle you’re interested in and request the most current numbers for your zip code. It is often easiest to find that thread by searching Google for “Edmunds lease” followed by the model of vehicle you’re interested in.
As for finding out what the dealer is using, you just ask them. If they won’t tell you, move on to a dealer that will.
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