Is it standard to include the first month’s payment in the gross capitalized cost (GCC)? I have never had a lease before, but my understanding based on research online was that GCC is a sum of the agreed-upon selling price plus things like fees and taxes. It’s not intuitive to me to include the first month payment in the GCC since it would essentially mean you are paying the first month twice (once upfront and again amortized over the length of the lease). But the dealer I was speaking with claimed it was standard practice across the industry. And from what I can tell searching the forums, there certainly are cases where the first month payment is “capitalized”. Can any one let me know if they have seen this before or if they know how common it is in general?
I’d look at how good the deal is, overall.
Is it “standard” practice? Well… I wouldn’t go that far 
it’s more about how you (the dealer) moves the money around to come up with your target deal.
Thanks for the response and the very reasonable advice! I guess I just wanted to get a sense of how transparent the dealer is being, and if they are someone I want to do business with. i.e. Is it something that they should have disclosed during negotiation?
Nope. If the 1st payment is capped, standard practice is to add it to the agreed upon value (Sell Price). As such, it does not appear on the lease agreement, and no one would ever know that the 1st payment was capped except you and the dealer. It’s not itemized anywhere. FYI- If the 1st pay is added to the sell price, it must exactly match the remaining payments. Some dealers seem to have difficulty matching them. So, be careful. I know ADP desking software screws it up at least in Ohio.
Not true. If the 1st is capped, you don’t pay it gain upfront.
Are you telling me that the dealer claims capping the 1st payment is standard practice across the country? If so, that’s utter BS! This is not common practice.
Yes, I used to do it when the cost of money was well below market rates. Then again, I always structure my own lease agreements and email it to dealer like the sample below. Then, I negotiate via phone/email. You may want to do the same.
All numbers should be accurate otherwise, you’ll lose credibility. Negotiate via phone/email. Once an agreement is reached, ask the dealer for a review copy of the lease agreement and all contract addenda BEFORE you go to the dealer and sign. Moreover, it’s helpful to know the terms and conditions of the lease contract such as early termination liability criteria and purchase option criteria as well as lease amortization methodology and excess wear/tear criteria. If all is as agreed, tell the SM that you’ll come in to sign right away. You don’t want any surprises or dealer excuses like …. Oh, we made a mistake. That’s unacceptable and shouldn’t be tolerated.
If the dealer isn’t transparent or is uncooperative or showing signs of incompetence, WALK AWAY AND MOVE ON!
Leasing is time-consuming and requires a good deal of study and attention to detail. If you don’t have the time to commit, perhaps your best alternative is a good broker. There are some outstanding brokers on this website. However, if you’re willing to commit your time and resources, always control the deal. That can only be achieved with education which breeds confidence and increases the likelihood of success.
??? Let me know.
EDIT: Don’t waste time trying to decipher a dealer’s worksheet or chasing after them. Otherwise, you’re allowing them to control the deal. They often omit a lot of relevant detail such as money factor, monthly base payment, monthly contractual payment, fees not itemized and even make mistakes. You need to rely on credible outside sources (e.g., LH marketplace and signed deals, Edmunds, etc.). Do your own research and establish a reasonable selling price in your market. Be sure to get a copy of the factory window sticker. Check for non-factory add-ons or dealer-installed options. And, if possible, eliminate those you don’t need or want. Get a list of all customer and dealer rebates/incentives including VIN#-specific discounts/incentives, if any. And, yes, the dealer has such a list.
The totality of the deal is much more important than how the first payment is paid by you, either on the spot or thru future payments by capping it.
Wow, thanks so mcuh for the thoughtful response! But, I am still a little confused about the mechanism by which the 1st payment is capped…
In my specific situation, the dealer and I had agreed on a sell price of 70214, but when they sent the lease agreement, the “agreed upon value value of the vehicle” was listed as 71,044.74, which they explained was 70,214 + 132.50 (license fee) + 698.24 (first month payment):
But then the first month payment and the license fee are also shown as due at signing:
So it still seems to me that I am double paying both the first month payment and the license fee, since they are due at signing AND they are being incorporated into the adjusted cap cost used to calculate the monthly payment:
Am I missing something here?
P.S. I appreciate you sharing your approach, and all the tips on how to best navigate the process.
Either the dealer is incompetent or is lying. Either way, it doesn’t bode well for them. They are collecting not only the first payment twice but the 132.50 license fee twice as well. Look at Section A lines (3) and (7). The agreed upon value IS THE SELL PRICE and should be the 70214 that you and they agreed upon. They need to honor the 70214. You’re getting hosed.
I would run away from this dealer as fast as you are able. This is total BS.
FYI- The money factor = .00094. All calcs were done correctly EXCEPT the moron should not be adding the 1st pay and license fee to the 70214 sell price. Sticking with the 70214 sell price, your base pay should be 621.78 and your contract payment 660.64 which includes tax @6.25%. As such, the Section A amount you owe at signing should be…
660.64 + 132.50 = 793.14
The 14800 is a rebate.
Bottom line: 793.14 due at signing followed by 23 monthly payments of 660.64 each.
If it were me, I would tell them that I will NOT favor a dealer with my business who is incompetent or lies. End of story.
Since they’re going to say it was a mistake. I would say “ let’s make a mistake for that exact amount in my favor and I’ll sign the paperwork…”
Worst case they say no. Best case you save another $750 or so.
What are the terms (payment and DAS) that you negotiated? Was it $0 DAS by any chance?
This would be my guess as to what is going on here.
Contract will show first month due at signing with cash due, but the cash payment will be paid by the dealer rarher than the consumer and the higher selling price accounts for it. May be due to a bank not allowing a sign and drive directly.
Yep, that’s exactly how my most recent $0 DAS lease was accounted for in the contract.
It was $830.74 (=698.24 first monthly payment + 132.50 license fee)
So you were writing them a check out of your pocket for $830.74 before you would pick up the car?
If that’s the case then yea, it does look like the first month payment is double counted on the contract and should not also be added back into the gross cap cost.
However, if your agreed upon payment and DAS is ultimately reflected in the contract, then it really doesn’t matter much in the end.
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