Every car lease agreement requires you to put an initial payment (also known as ‘initial rental’) down on a vehicle. It’s not to be confused with a deposit, which is refundable. This upfront cost only works against the total cost of a leasing deal and determines the cost of your monthly payments.

Are initial payments flexible? And is it better to put down more? Read on to find out everything you need to know.

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How are initial payments calculated?

When you configure a new lease car, the finance provider funding the agreement will ask you to specify how much you want to put down as an initial payment. Depending on the company you choose, you’ll have a few options when it comes to what the amount will be.

Typically, there’s a choice of one, three, six or nine months’ upfront – but what does this mean? Well, each one represents a multiple of the rental cost for leasing a car. For example, if you wanted a deal which was £250, then initial payments would be as follows:

  • One month - £250
  • Three months - £750
  • Six months - £1,500

Remember: A higher initial payment will make monthly rentals cheaper, but total cost of the agreement will be the same.

Payment plan

Leasing companies and providers can sometimes display the total cost of its deals in what’s known as a ‘payment plan’. This is a numerical summary of the total cost of a lease agreement, which will include the initial payment and remaining monthly rentals.

For example, a 36-month contract with three months’ upfront would look like ‘3+36’. The first figure tells you how much will be made upfront, while the second shows you the number of rentals payable to the finance provider for the remainder of your contract.

Payment plans aren’t always used by leasing providers. Instead, you may just be shown a standard summary in a table which breaks down the overall price of your deal, including any processing fees, the initial payment, the hire price and any additional maintenance package costs you may add to a deal.

Which initial payment should I choose?

As we mentioned earlier, you won’t make a deal cheaper by putting down a larger initial payment. However, some people prefer to spend as much as they can afford on this in order to make the monthly rentals lower.

Because the lease payments for a vehicle make up most of an agreement, it can often make sense to keep the price down to suit your budget. However, you don’t want to spend so much that it results in you not being able to make the remaining instalments.

We advise using a comparison website in order to configure your deal, this way you can see exactly what you’re spending upfront and then throughout the remainder of your contract. Our search tool allows you to find a new car by preferred manufacturer or your monthly budget and see how your chosen initial payment, contract length and annual mileage impacts the cost of each listed deal. You’ll even have a handy summary containing all the details and price of your agreement before you enquire about it to the provider.

Is there such thing as 'no deposit' leasing?

There is, but it doesn’t imply what you may think. Regardless of how you choose to lease, whether it’s through an online comparison site or directly through a provider, you’ll need to put some form of initial payment down.

Although certain providers may advertise that they cater for ‘no deposit’ leasing, this just means that they will accept a payment that is equivalent to one month of the lease price. For example, if you see a deal for a vehicle which costs £100 per month, you would only be required to pay £100 to the funder for the initial rental, followed by the remaining lease payments at this price.

This phrase can be misleading too when it comes to defining what the initial rental is, which isn’t a deposit. At no point is it refundable, but instead it forms a part of the overall cost of the vehicle’s depreciation over the duration of your lease term.

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When/how do I pay the initial payment?

Depending on the finance provider you’ve chosen to lease with, you may find that you need to make your initial payment before the vehicle is delivered, or usually within 14 days of it arriving. You’ll be made aware of the timeline for the initial rental at the enquiry stage, but there will always be one month between the initial rental and your first lease payment. The date of the latter will be specified by the finance provider and you’ll be made aware of this.

When it comes to paying the initial rental, you can do this through a bank transfer, direct debit or credit/debit card payment. Unfortunately, cash isn’t accepted.