Do You Have to Pay an Initial Payment When Leasing a Car?
When leasing a car, you typically need to put down an initial payment, also known as a down payment. This non-refundable deposit is paid at the start of your lease contract to secure the vehicle.
Historically, initial payments could be split over 12 monthly instalments, but now they are usually paid as a single lump sum upfront. This amount can range from £1,000 to £18,000, depending on the type of vehicle and your desired monthly payment.
Below, we’ll cover everything you need to know about initial payments, including what they are, how they’re calculated, and when they’re due.
What Is an Initial Payment on a Car Lease?
An initial payment is the first payment you make on your car lease. Similar to a mortgage down payment, this lump sum reduces your monthly payments throughout the lease period.
While the total cost of the lease remains the same, a larger initial payment means lower monthly payments, and vice versa.
How Do Dealers Calculate the Cost of an Initial Payment?
The cost of your initial payment is flexible and can often be tailored to suit your budget:
- Higher Initial Payment: Leads to lower monthly payments.
- Lower Initial Payment: Results in higher monthly payments.
However, there are exceptions:
- Some agreements may require a specific initial payment due to dealership policy, your credit history, or financial circumstances.
Is a Down Payment Required for Car Leasing?
Most lease deals require an initial payment, but there are occasionally no initial payment deals available. These are rare and often come with higher monthly payments.
How Are Initial Payments Made?
Initial payments are typically made using:
- Direct debit (most common).
- Debit card.
- Bank transfer.
Important: Due to anti-fraud regulations, initial payments cannot be made in cash.
When Are Initial Payments Made?
The timing of your initial payment depends on the payment method:
- Debit Card Payments: Must be made before delivery of the vehicle.
- Direct Debit or Bank Transfer: Usually made after delivery of the car.
What Happens If You Have Difficulty Making the Initial Payment?
- Debit Card Payments: If there are insufficient funds, your car’s delivery won’t be booked.
- Direct Debit or Bank Transfer: A declined payment is considered late and may incur a penalty fee.
What Happens to the Initial Payment on a Lease?
The initial payment is non-refundable. It is not returned at the end of the lease as it:
- Reduces your monthly payments.
- Serves as a financial guarantee to the leasing company.
Summary
- An initial payment is the first payment you make for your car lease.
- The amount is determined by your budget and desired monthly payments, as well as any dealer stipulations.
- Payments are made before or after delivery, depending on your payment method.
- If you fail to make the payment, it will be treated as a late payment and may incur fines.
- Initial payments are non-refundable and do not affect the overall cost of the lease.