ELI5: Cap hit. How do signing bonus, guaranteed money, roster bonuses, performance bonuses, and options contribute to cap hit?

The three biggest factors in any contract is length in years, total guaranteed money, and signing bonus.

Signing bonus money can be pro-rated, meaning spread out, over a number of years (up to 5). This is significant because it is the single biggest way to reduce cap hits for the team. Instead of paying out a huge signing bonus in year one of the deal and having a correspondingly huge cap hit teams are able to have the bonus spread out over a number of years. It is also typically the single largest source of guaranteed money in a players contract.

Guaranteed money is the money that will be paid out to the player no matter what. Hurt, healthy, happy, or mad, this is the total dollar amount that the player will see GUARANTEED. How this money is paid out, through signing bonuses, workout bonuses, or roster bonuses, and the years of the deal in which this guaranteed money occurs are the biggest indicators of how long a team will actually keep a player around. A dirty-math example of this might be a player signing a 6 year deal, but with no guaranteed money after the first 2 years of the deal. There would be little incentive for the player to play on a non-guaranteed contract come year 3 of the deal (this is when hold-outs occur).

We hear numbers thrown around all the time, Russell Wilson is going to get 25 million a year, Randall Cobb wants 12 million a year, etc, etc. These numbers are mostly meaningless. What matters in the end is the length of their contracts and how much money they will be guaranteed.

Aaron Rodgers contract is a fantastic example of how the numbers can be skewed. He signed a 22 million dollar per year extension, and yet not until year 5 of his deal do the Packers have a single season cap hit exceeding 20 million dollars. Bonuses and the way they can be manipulated make these "X dollars per year" monikers mostly useless.

/r/nfl Thread