Posts Tagged ‘what is rent charge on a car lease’

What is Rent Charge on a Car Lease?

Tuesday, April 17th, 2012

The rent charge on a car lease refers to the total sum of finance charges that the lessee will pay over the entire term of the car lease. The rent charge is also known as the “lease charge” and it is one of the three components of what is paid for over the term of a car lease. To come up with the rent charge, the dealer uses the money factor. The money factor is a small decimal number that is similar to an interest rate on loans or vehicles that are financed. The money factor is based on the lessee’s credit worthiness, which essentially entails that people with higher credit scores will be offered lower money factors and thus lower monthly payments.

The rent charge is essentially a fee that is paid for borrowing the finance company’s money. Think of it as paying interest on a loan. The rent charge makes up a small portion of the total monthly car lease payment. The depreciation charge is what makes up the majority of the total monthly lease payment.