I'm looking to lease and a little confused about cap cost reduction...the dealer I've been speaking to is telling me the Cap cost reduction isn't applied to the total cost of the vehicle, it merely lowers the monthly payment...can someone explain this to me ...I"m most likely going to purchase the vehicle at the end of the lease, so I looking to negotiate the price down now...if that's how it works...

Dan-

Putting money down is the same thing as reducing the selling price of the car.

Because you pay for the use of a vehicle during a lease, you should put as little money down as possible, up front. Although putting money down can lower your lease payments (by reducing your capitalized cost) in most cases it cannot be regained in the event of early termination due to a loss.

For example, a customer once leased a Toyota 4Runner and put $3,000
down as a cap reduction. Five months later the vehicle was totaled in an
accident. The client's insurance paid its portion of the lease payoff and
Gap Insurance paid the balance. Our client walked away with only paying
his insurance deductible but he did not get reimbursed for his initial down
payment of $3,000. It was lost.

The moral of this true story is to put as little money down as possible,
ideally no money down. Here are some other things to consider:

- Money down is taxable
- Take the money you would have put down and invest it
- Put your down payment in a savings account and use a portion each month to help make your lease payment

http://www.leasecompare.com/autolease101_6.php