Car Leasing: Capitalized Cost Explained

Reader question:

When leasing a new car, what does ‘capitalized cost’ mean?


I’m glad you asked.

Capitalized cost is another one of those confusing things that have to do with leasing a car. Like residual value, though, it’s one of the most important things in the car leasing process, and if you don’t know what’s up with it, then you have no business being on that car lot. You should be informed about the car leasing process before you go and lease a car, and knowing about capitalized cost is a big part of that.

The car lender will tend to set the capitalized cost based on the MSRP, which is the Manufacturer’s S Retail Price. But if you’re buying a new car, you can haggle and take the figure to lower than the MSRP, and car leasing is no different. You still have the ability to negotiate.

The capitalized cost is not independent and staying. If you trade in another car or make a down payment, or even get a rebate from the manufacturer, that should chip the capitalized cost down. It goes the same way if you trade in a car that you still owe on–tat should bring the capitalized cost up.

Here’s the thing: the capitalized cost doesn’t have to be the MSRP. The car leasing company can actually make the price higher, for example when it’s a car that’s really popular and gets wiped off the lot quickly. If you come across a car like this, think again.

When you’re shopping around for a new car lease, always use the capitalized cost to compare.


Fashun Guadarrama.

About the Author:

Austin Davis, consumer car repair advocate. "Hi there! I love to help people solve their car repair problems and I hope my site was helpful to you today. Thank you for stopping by."