Do I Have To Pay a Down Payment When Leasing a Car?

If you choose to lease a car, you must pay a down payment, sometimes called an initial payment. Essentially, this forms a deposit that you must put down at the beginning of your contract.

Historically, down payments required for a lease car used to be calculated as a certain number of payments and would comprise anywhere between one to 12 monthly installments. In recent years, however, this method has been replaced with a single amount paid upfront that can be anything from £1,000 to £18,000, depending on the type of vehicle being leased. However, you will have some choice in how much your down payment is, which will affect how much you pay each month to lease your vehicle.

In the following sections, we’ll explore down payments for lease cars, including what they are, how they are calculated and when you must pay them.

What is a down payment?

In simple terms, your down payment is your deposit. Just like with a mortgage on your home, you will pay a greater sum at the beginning of your contract to ensure your monthly payments are lower. The entire cost of your lease contract will remain the same, however, the larger the down payment you make, the less you will have to pay out every month.

How do dealers calculate the cost of a down payment?

How much you pay when making your down payment will be, to some extent, in your hands. After discussing your budget with the dealership, you can inform them of how much money you can put towards this initial payment on a leased car. This is usually impacted by your monthly budget. If, considering your monthly outgoings, you would like to make smaller payments each month for the rental, then you can choose to pay a higher down payment. However, if you feel you can cope with the cost each month, you can make your initial payment lower.

This being said, there are some exceptions. Certain finance agreements will dictate that you make a specific down payment, which may be due to their house policy, your credit history, or your financial situation.

Your down payment will be clearly marked on your lease agreement but may be written as a single amount (e.g., £1,000) of the equivalent in monthly payments (e.g., 4 x 250).

How and when are down payments made?

Typically, you’ll make your down payment using direct debit, although it may also be possible to use a debit card or bank transfer. Due to regulations designed to prevent fraud and money laundering, you won’t be able to make a cash payment.

When you make your down payment will depend on the method you use to make it. Down payments made using a debit card will need to be actioned before you can receive your new lease car, however, if you pay by direct debit or a bank transfer, you’ll usually pay after delivery.

What happens if you have difficulty making a down payment?

If you are making a down payment using a debit card and there are not enough funds in your account, delivery for your lease vehicle won’t be booked in. On the other hand, if you have chosen to pay it via direct debit or bank transfer and the payments are declined, this will be counted as a late payment and you will pay a penalty.

Will you get your down payment back at the end of your contract?

Down payments are entirely non-refundable. The down payment is just a method of reducing monthly payments or offering a guarantee to those you are leasing from so it will not be returned.

In brief, a down payment is the first payment you make. Exactly how much your down payment will be is impacted by how large a payment you wish to make each month for the rest of your contract, as well as any house stipulations from those you are leasing from. You’ll make your down payment either after or before delivery, depending on your payment method. If you fail to make a payment, it will be regarded as a late payment.

For expert advice on lease agreements, contact our dedicated team today.