Gross capitalized cost is the amount financed in a vehicle lease before capital cost reductions, including vehicle cost, taxes, fees, and rent. It determines monthly payments, and is similar to the financed amount of a loan. Leasing is a type of loan, and the gross capitalized cost includes all lease costs. Lessees can negotiate the vehicle price before signing the agreement.
Gross capitalized cost, often shortened to maximum gross cost, is a term commonly used in vehicle leasing. It refers to the amount that is financed in the lease before subtracting reductions in capital costs. Includes the cost of the vehicle, taxes, fees and rent. The gross capitalized cost is used to determine the amount of capital cost reductions and the monthly payments the lessee must pay.
Vehicle leasing has different terminology from other forms of financing. Each term, however, has a corresponding concept in the world of traditional loans. The gross capitalized cost is the same as the financed amount of a loan.
Leasing a vehicle is a form of financing. The renter is using the vehicle for a certain period of time, so in some ways it is similar to renting an apartment. Real estate, however, can appreciate in value; Vehicles depreciate. This means that the lessee uses part of the value of the vehicle, which is included in the lease. In effect, the lessee buys a portion of the vehicle equal to the initial value less the residual value at the end of the lease, so the lease is a type of loan rather than a rental agreement.
Gross capitalized cost includes all costs that are part of the lease. The amount of depreciation over the life of the lease, rental fees, acquisition fees, and sales tax are all components of gross capitalized cost. It also includes interest payments on the financed portion of the vehicle’s value; In lease terminology, the interest rate is known as the lease rate or money factor, and is generally not disclosed to the lessee. The cost of capital reduction, called a down payment in traditional terminology, is subtracted from the gross figure, as are any fees or taxes paid in cash when the lease is signed. The remaining amount is called the net capitalized cost and is paid in monthly installments throughout the lease.
If you are leasing a vehicle, you may request an explanation of the gross capitalized cost before you agree to the lease. The dealer will give you an itemized list of factors that contribute to the amount. A major component of this cost is the cost of the vehicle. Before signing the agreement, you can negotiate with the dealer on the price just as you would if you were buying the car.
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