Cap Cost Reduction

The cap cost reduction, short for capitalized cost reduction, refers to any cash down payment, trade-in credit, or rebate that is used towards reducing the gross capitalized cost. In most cases, the cap cost reduction is in the form of a cash down payment paid upfront by the lessee at the time when the car lease agreement is signed. The difference between the gross capitalized cost and the cap cost reduction is the adjusted capitalized cost, which is then used to calculate the exact monthly lease payment. The higher the capitalized cost reduction, the lower the monthly lease payments.