Capitalized cap cost
What is capitalized cap cost?
Capitalized cap cost is the sales price of a car being financed with a lease. It includes the car’s negotiated price plus any additional costs that will be financed. The capitalized cap cost, often just called cap cost, helps buyers determine how much monthly payments will be.
Capitalized cap cost is the price one actually agrees to pay for a car. It’s the value they’ll be financing during the lease term. This value normally falls between the car’s dealer sticker price and the factory invoice cost.
Besides the interest rate, the cap cost is one of the primary determinants of the monthly lease payment. It’s determined after calculating the gross cap cost, or the total amount the car buyer agrees to pay the dealer before any deductions, like a down payment, are made.
Any money the buyer puts toward the car before beginning the lease term reduces the cap cost. The reduction can be made from cash, rebates, or the value of a trade-in car. If the buyer makes a down payment, however, the lease normally includes gap insurance for the first couple of months, which covers any accidents that could damage the car. Net cap cost is what’s left after deducting any discounts and down payments.
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Capitalized cap cost example
Loras leases a car for 36 months. The car’s MSRP is $36,000. He pays a down payment of $3,600. He also trades in his previous car and receives $2,000 toward the new one. His total cap cost is $30,400, meaning he has to pay $844.44 each month before taxes.