Capitalized Cost

The capitalized cost, often shortened to “cap cost,” is the initial value of the vehicle in a lease agreement, similar to the purchase price in a financing contract. It includes the negotiated price of the car plus additional charges such as acquisition fees, taxes, and optional add-ons.

The cap cost is a major factor in determining monthly lease payments, as it represents the starting point from which depreciation and residual value are calculated. Negotiating a lower cap cost directly reduces lease payments, just as negotiating a lower purchase price reduces loan payments.

Lessees can often lower cap cost through discounts, rebates, trade-ins, or down payments (known as capitalized cost reductions). Understanding cap cost is vital for comparing lease deals and ensuring transparency, as some dealers may attempt to hide inflated charges within it.

By carefully reviewing and negotiating cap cost, lessees can secure better terms and reduce the total cost of leasing.