Your Rent Charge (or Finance Fee) is the cost you pay to your leasing company for the use of the money that purchased the car. If you took out a loan, you would pay this in the form of a straight interest payment. A Finance Fee on a lease is calculated slightly differently than a traditional interest payment.
Rent Charge = (Net Capitalized Cost + Residual) × Money Factor A Rent Charge requires you to add both the Net Capitalized Cost of the vehicle to the Residual before you multiply it by your Money Factor (for more information on determining Money Factors, see “Leasing Basics”) Many people think that adding both the Net Capitalized Cost and the Residual would not make sense, but it's a simplified method of accounting for the use of the bank's money.
Misunderstanding this formula is a very common error among consumers looking to calculate their own lease payment.
Let's look at an example:
Factors Results
- Net Capitalized Cost $25,000
- Residual $15,000
- Total Net Cap Cost + Residual $40,000
- Money Factor .0025
- Money Factor × Total Cap Cost + Residual = $100.00
- Total Rent Charge (Finance Fee) $100.00
Notice that when you add both the Net Capitalized Cost to the Residual you get a total of $40,000, which increases the total balance you will use to multiply with your money factor.
You’re Rent Charge and Depreciation makes up the largest portion of your monthly payment. Working with these values will make the largest impact on keeping your payment as low as possible. There is a small consequence that will reflect in your taxes, which is the third component of your payment. Obviously the larger your monthly payment, the larger your tax component will be.
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