The car lease rent charge is one of the several components of a monthly car lease payment. There are three different components that make up a monthly auto lease payment which include the rent charge, the depreciation charge, and sales tax. The rent charge, also known as the finance fee or leasing fee, is the portion of the monthly lease payment that is paid as a “fee” for borrowing a leased car. It is similar to paying interest on a loan.
The rent charge is calculated using a small decimal number that is similar to an interest rate on loans. This small decimal number is known as the money factor and can even be converted into an interest rate by multiplying it by 2400. It works in a way that is similar to interest rates in the sense that higher money factors lead to higher rent charges, while lower money factors lead to lower rent charges.
It is important to realize that money factors often remain unlisted on car lease agreements which means car lessees often do not know whether the money factor that was used to determine their rent charge was fair or reasonable. Therefore, it is important to always ask the dealer what money factor was used to come up with the monthly lease payment. This money factor should then be converted into an interest rate. Money factors for car leases should be comparable to interest rates available for financed cars.