Capitalized Cost, often referred to in the context of leases, particularly automobile leases, is the total amount that is being financed with the lease. This cost typically includes the negotiated selling price of the item being leased, which in the case of a car lease would be the vehicle itself, along with any additional fees or charges that are to be included in the financing. These additional costs can include various acquisition fees, taxes, insurance, warranties, and any other add-ons that the lessee chooses to include in the lease agreement. The Capitalized Cost can be reduced by any down payment, rebates, trade-in allowances, or dealer discounts provided at the time of entering into the lease. The lower the Capitalized Cost, the lower the monthly lease payment will generally be, as the lease payments are calculated based on this figure, minus the residual value of the item at the end of the lease term, divided over the number of months in the lease agreement.
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