Quote:
Originally posted by Jeff Kleb
Believe me when I tell you that your credit score will greatly affect your lease payment, almost as much as the residual value versus the capitalized cost.
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I just wanted to elobortate on the credit score comment by Jeff.
The money factor (interest rate) is set by the finance company every month (usually Toyota) and the dealer uses that number during preliminary lease negotiations. At that point, the biggest factor that moves the lease payments up and down is the adjusted cap cost and the residual value.
The dealer then submits the numbers to the finance company who will run a credit check. If the finance company finds you have bad credit, it can refuse the lease entirely or counter with a monthly payment that includes a higher money factor to account for the increased risk.
For example, under my lease, I had a money factor of .00022 (.5%). For each 1% increase in the interest rate, an additional $21 would be added to the monthly payment.
However, unlike many other loans, if you have great credit, congrats, but that won't lower the money factor below the set rate.
If you have good credit, I don't think you have anything to worry about. Just remember, the money factor usually changes monthly, so two people could have vastly different monthly payments just based on when they leased the vehicle, regardless of credit score.
6 years ago I was looking to lease a Jeep Cherokee. In May, the monthly payment was about $250. In June, the monthly payment rose to $348.