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 leasing. However, if you own your present car, you may be able to use it, as a trade-in, to satisfy the cap cost reduction to start the lease. Remember, you must pay sales tax on any cap cost reduction you make. Another source of capital cost reduction may be dealer or manufacturer participation. Dealers and manufacturers will sometimes lower the cap cost or offer a rebate that reduces the cap cost. A dealer or manufacturer cap cost reduction does lower your total out-of-pocket dollars, unlike a cap cost reduction that you must pay.