Rick's Free Auto Repair Advice

Capitalized cost or adjusted capitalized cost

What is capitalized cost or adjusted capitalized cost for a car lease?

It the strictest car lease terms, capitalized cost (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 considered the cap cost of the vehicle. But in the real world it’s a little more complicated because you then add adjustments to that cost.

What things adjust capitalized 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 capitalized 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 (if you buy it from the dealer—which you should NEVER do). Once all those costs are added or deducted, you arrive at the adjusted capitalized cost.

How is cap cost used?

The leasing company uses adds the acquisition fee and the money factor to the adjusted cap 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.

©, 2016 Rick Muscoplat

 

Posted on by Rick Muscoplat


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