Capitalized Cost

Capitalized CostThe capitalized cost is simply your agreed upon purchase price of the car you are leasing after all discounts and down payments are applied. While the MSRP is the car maker’s suggested retail price of the car your are buying, the cap cost is the price you actually agree to pay for the car. This capitalized amount is normally a dollar value that is somewhere between the car’s MSRP and Factory Invoice Cost. The cap cost is the sales price of the car.

What is a Capitalized Cost Reduction or Cap Cost Reduction?

The Capitalized Reduction (sometimes called, Cap Cost Reduction or Capitalized Reduction) is a dollar amount in the form of a discount, rebate, your cash down payment or other deduction which reduces the capitalized cost of the vehicle you are leasing. If you’re trading in a car for a loan in which you are upside down, a Cap Cost reduction might either be required to obtain financing for the lease or it may be desired to lower your monthly payment. Of course, you can always decide to keep as much money in the bank as possible and use that savings to help make the higher monthly payments that were absorbed in the upside down loan. If you’re not trading in an unpaid car loan, then a Cap Cost reduction should never be required to lease a car. You will often see attractive, low monthly car lease payment deals in your newspaper ads. Read the fine print because that’s usually where you’ll see a Capitalized Reduction requirement of $1000, $2,000, $3,000 or more.

Is Capitalized Cost ever Higher than the MSRP?

One thing that can raise the capitalized amount is an unpaid loan for a car that you’re trading in. If the capitalized amount of the car is higher than the MSRP, you can expect your payment to be higher unless you put some money down in the form of a capitalized reduction to reduce this.

Is the Cap Cost Negotiable?

You bet it is! The cap cost is the most negotiable part of your car lease deal.  The Factory Invoice price of the car and MSRP are two of the easiest things to know about the car lease you are negotiating.  While a low average monthly car payment should be your priority, the capitalized cost of the car is where your dealer can make it happen. Getting the best car lease deal will certainly require a reasonable discount from your dealer on the Cap Cost of the car.

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