What a rate factor is
A rate factor is a decimal that converts equipment cost into a monthly payment. Multiply one by the other and you have the payment.
An $8,400 machine at a factor of 0.0250 gives a payment of $210 a month. Change the factor to 0.0295 and the payment becomes $248 — the same machine, the same term, $2,280 more over 48 months. Nothing on the quote has to change except one number most customers never ask about.
What moves the factor
Term length. Longer terms produce lower factors. A 24-month factor might be 0.0455 while a 60-month factor on identical credit is 0.0212.
Buyout type. A $1 buyout factor runs a few points above the fair market value factor for the same term, because the residual value is not coming back to the lessor.
Credit quality. Time in business, payment history and transaction size all move it. A ten-year-old company with clean credit gets a materially better factor than a two-year-old one.
Cost of funds. Factors move with prevailing interest rates. A quote from last year is not valid this year.
How padding works
A dealer receives a factor from the funding source and may quote you a higher one, keeping the difference. This is legal and common. It is also invisible unless you ask, because the quote shows only a monthly payment.
Two questions surface it. First: what is the equipment price you are financing? Second: what rate factor are you applying? With both numbers you can check the multiplication yourself. If a dealer will not give you both, that is your answer.
What to do with this
Ask every dealer bidding on your machine for the equipment price and the rate factor separately, then compare. Two quotes with identical payments can hide very different equipment prices, and two quotes with identical equipment prices can hide very different factors.
We publish the factors we use on our copier leasing page and show the arithmetic in the calculator. Compare it against anything else you are quoted.
Common questions
What is a good copier lease rate factor?
For a business with solid credit in a normal rate environment, roughly 0.0212 to 0.0230 at 60 months and 0.0250 to 0.0270 at 48 months for a fair market value lease. Newer businesses and smaller transactions price higher.
How do I convert a lease rate factor to an interest rate?
There is no clean conversion because the factor also carries residual assumptions and fees. Compare factor to factor across quotes on the same term and buyout type rather than trying to derive an APR.