Lease terminology question

I’m in TN and looking to lease a Volvo s60 Recharge. When I build the car on and price it out, it shows the cost of a lease. I see what they say is cash due at signing is$4498 but then a couple lines down it says cash due at signing includes $10,750 as capitalized cost reduction. So what is the $10,750? I know this pricing is all before any negotiations with the dealer on pricing, but I’m confused at what they expect to be due at signing. See quoted text below.

This offer is available only to qualified customers with a credit score of 750 or above, at participating dealers by Volvo Car Financial Services, N.A.

  • through 11/30/2020.

  • Advertised lease rate based on 36 months, a vehicle selling price of $55,040, $4,498 due at signing, $995 acquisition fee, including the gross capitalized cost of $56,035.

  • Total monthly payments equal $17,928.

  • Cash due at signing includes $10,750 capitalized cost reduction, a required security deposit of $0, and first month’s lease payment of $498.

  • $.25 charge per mile over 10,000 miles per year.

  • $350 disposition fee due at lease end unless customer purchases vehicle or decides to re-finance.

  • $350 lease-end purchase option fee.

  • Early termination fees may apply.

Website offers like that are pretty much useless. Just ignore them. They can’t even be consistent with themselves.

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This is simpler than you think. Capital cost reduction is anything used to reduce the amount your financing, above and beyond your sales price. So if you buy a $50k car and you agree on a purchase price of $45k before incentives and any down payment, etc., then your gross cap cost is $45k. But if there is also a $5k seasonable factory rebate from Volvo and you choose to put $5k as a down payment, then your net capitalized cost was $35k — this is the amount that your lease payments will ultimately be based on. Your residual value is based on the MSRP no matter what is negotiated.

So when they say cap cost reduction, they’re usually referring to “customer cash,” commonly known as a down payment. Now, you shouldn’t make a down payment on a lease - ever. Better to have higher payments and use that money from your savings account to help you make a portion of the payments each month.

Now, I haven’t factored in taxes and DMV fees and the like - those items will also raise your cap cost, but I didn’t want to make the example too complicated.

What you want to do is negotiate the best sales price - before rebates/incentive - but quote the car out based only on “drive offs only” aka no customer cash aka no cap cost reduction (except for any applicable factory rebates - those are wonderful cap cost reductions).

In other words, if they’re quoting this much in “cap cost reduction,” they’re assuming you’re paying a bunch of money as a down payment to reduce your payments, which is probably also why your advertised payment looks reasonably attractive. And that’s how they get you :slight_smile:

So my advice again - best way to get a good deal on the car is to get a good deal on the car, before any of the fuzzy math. Know the market (find out the base money factor, confirm the residual value, and know how much off MSRP people are paying for the same car before you solve the rest of the math problem).

Happy to elaborate if any of this didn’t make sense!

Edit: in case you already knew all of this, and this wasn’t your question, hopefully the info I wrote will be helpful to someone else reading!

Second edit: trying to figure out the inconsistency in their offer that you cite - if $4450 is DAS but cap cost reduction is listed at $10k plus first month payment, I would have to assume that the delta is Volvo incentives straight from the factory. Problem with these offers, as I mention above, is that they’re juicing the leasing number to make the payment look good while probably not discounting the car that much, so make sure to know what the gross cap cost is before you factor in incentives, customer cash/customer paid cap reduction, and the like.


Build your car, then from the Summary click on “payment estimator”. That will give you the actual payment where you can play with the numbers (ex: adjust down payment to reflect dealer discount)


Thank you, the payment estimator is exactly what I was looking for.

Better yet, use the LH calculator for more accurate numbers once you have accurate inputs.

He needs to get MF/RV for that from Edmunds. The Estimator is precise, but without fees/taxes.

Agreed. But he also should use LH calc to verify #s from the manufacturer’s estimator, no reason not to!

The T8’s are nowhere to be found, they have some incoming in Feb, but aren’t going to be willing to negotiate much on price on those. So I’m turning my sites to 2020’s. They are all 10% off MSRP to start. Scouring the forums to see what others have negotiated now to see what I should be aiming for.

10% before incentives is a great target price.

Make sure it’s before ALL the incentives. I’m looking at you lease cash/Volvo allowance.