What Are Rent Charges in Leasing a Vehicle?

by Madison Garcia
Rent charges on leases are similar to interest payments on car purchases.

Leasing contracts are complicated documents with a variety of charges. Rent charges are also referred to lease charges. They're determined by the money factor, or implied interest, in the contract.

Definition

Your vehicle rent charge is what you pay for the right to spread out your payments. Rent charges are similar to the concept of interest charges on a car purchase. For instance, a $500 car payment may comprise $450 of principal and $50 of interest. The same thing is true for your lease payment; a certain percentage is the cost of the car and a certain amount is the rent charge.

Determination

The leasing company will multiply the cost of the car by the money factor to determine the rent charge. A money factor isn't presented in a way that's equivalent to an interest rate. However, according to the Cars.com leasing glossary, you can determine the equivalent annual interest rate by multiplying the money factor by 2.4. For example, if the leasing company tells you that your money factor is 2.9, your equivalent annual interest rate is around 6.96 percent -- 2.4 multiplied by 2.9.

About the Author

Based in San Diego, Calif., Madison Garcia is a writer specializing in business topics. Garcia received her Master of Science in accountancy from San Diego State University.

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