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Capitalized Cost Reduction is a car leasing term that refers to any cash the leaseholder may pay upfront, this can include a down payment, trade-in credit, or rebate. The capitalized cost reduction payment decreases, or reduces, the total amount being financed through the lease. Any capitalized cost reduction payments will serve to lower the monthly lease payments by reducing the net capitalized costs where:
Net Capitalized Costs = Capitalized Costs - Capitalized Cost Reduction
The difference between net capitalized cost and the residual value is used to calculate the monthly lease payments. Including a capitalized cost reduction payment is one way for a leasing company to make monthly lease payments look more attractive to potential leaseholders. |
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