Capitalized cost lease versus adjusted capitalized cost lease

What’s the difference between a capitalized cost lease versus adjusted capitalized lease?

It the strictest car lease terms, a capitalized cost lease (also called cap cost) is just the negotiated cost of the vehicle. Let’s say the sticker price of the car or truck is $27,566 and you’ve negotiated a great deal and strong-armed the salesperson down to $24,768; that is now the cap cost of the vehicle. But in the real world it’s a little more complicated because the lessor then adds adjustments to that cost.

What things adjust cap cost?

Let’s say you’re trading in your old car and the dealer is willing to give you $4,000 for it. That’s considered an adjustment to be deducted from the cap cost. Or, let’s say the lease terms call for a down payment, that’s also an adjustment that’s deducted from cap cost.

However, other costs add to cap cost, like; sales tax,  license plates or tabs, title transfer fees (usually when leasing a used vehicle) and GAP insurance. Once all those costs are added or deducted, you arrive at an adjusted capitalized cost. In other words, the cap cost is what you’ve managed to negotiate for the new car and the adjusted capitalized cost is the capitalized cost plus all the additional costs minus your trade-in.

How is cap cost used?

The leasing company uses adds the acquisition fee and the money factor to the adjusted capitalized cost before subtracting the residual value. That final figure is then divided by the number of months in your lease to determine your monthly lease cost.

See this post at Consumer Reports for more information on car lease terms

©, 2016 Rick Muscoplat