Capitalized Cost Reduction


Capitalized Cost Reduction

Any upfront payment that reduces the cost of financing. Capitalized cost reduction is generally associated with the purchase or lease of an automobile, and reduces the monthly payment owed if the vehicle is financed. Reductions can be made from cash, the value of a trade-in vehicle or through rebates.

A capitalized cost reduction for a car is similar to a down payment on a home. The higher the upfront money put against the value of the good being purchased, the lower the remaining balance requiring finance will be.

Monthly lease payments are calculated by taking the net capitalized cost (capitalized cost - capitalized cost reduction) and subtracting residual costs.


Investment dictionary. . 2012.

Look at other dictionaries:

  • capitalized cost reduction — A fancy name for a cash down payment, money you pay up front that is applied to the final purchase price of a lease. A large cap cost reduction will, of course reduce the monthly payments, but it will also negate one of the big advantages of… …   Dictionary of automotive terms

  • cost reduction — See cap cost reduction capitalized cost reduction …   Dictionary of automotive terms

  • cap cost reduction — See capitalized cost reduction …   Dictionary of automotive terms

  • net capitalized cost — The price of the vehicle after deducting any dealer participation, manufacturer discounts, and cap cost reduction ( down payment ) from the MSRP …   Dictionary of automotive terms

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  • dealer participation — The amount contributed by the dealer to reduce the final purchase price in the lease contract. Dealer participation can take the form of a rebate or simply a discount. The dealer participation is reflected in the lease contract as a capitalized… …   Dictionary of automotive terms

  • manufacturer discounts — In some leases, particularly subvented leases, the manufacturer reduces the MSRP which lowers the purchase price of the vehicle, which the lease is based on. This is a form of capitalized cost reduction …   Dictionary of automotive terms

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