What is Capitalized Cost?

Capitalized cost, often shortened to cap cost, is the negotiated price of a vehicle that forms the basis of a lease. It is the leasing equivalent of the selling price on a finance deal. The gross capitalized cost can include the vehicle price plus fees, taxes on some items, and any add-on products rolled into the lease. Cap cost reductions, such as a down payment, trade-in equity, or manufacturer rebates, lower this figure to arrive at the adjusted capitalized cost. Because monthly lease payments are calculated from the adjusted cap cost, the residual value, and the money factor, a lower capitalized cost directly reduces the payment. Canadian dealers should show customers exactly which reductions apply so the lease structure stays transparent and compliant with all-in pricing rules.