If you take a look at any car leasing website you will find the term "initial payment" used in the deals. Sometimes it can cause confusion and has been wrongly compared with a deposit. Below we'll explain how it works using examples.
An initial rental is there to help reduce the monthly costs of a lease, it works similar to a deposit, your overall cost stays the same but the way that is broken up is up to you either a larger upfront and a smaller monthly payment or a smaller upfront and a larger monthly payment.
There are 2 kinds of lease contracts the first is called a spread. A spread is the most common form of leasing and near enough all contracts are this type and this is what all our website prices are based on, here is an example of how it works
if the overall cost of a lease over 3 years is £10,000 and you didn't want to put any money upfront you would divide the £10,000 by 36 so you have a monthly payment of £277.78 for 36 months. But if you wanted to put some money upfront to reduce your monthly then it would work like this; let's say you want to put 9 months upfront, this is referred to a 9 'plus' 35, so 9 months upfront then 35 payments of your new monthly rental.
So take your £10,000 and divide it by 44 (9 'plus' 35) this gives you a monthly price of £227.27 and an initial rental of £2045.45 when timed by 9; this gives us the same overall costs but they way itâ€™s broken down has changed.
The second kind of agreement is called a 'terminal pause', this is not a common sort of agreement and not used for personal contracts but instead, for business leasing, we use it for new start businesses who may not have the credit history for a spread agreement, so it takes the risk away from the finance company, here is how it works:
Your cost is still £10000 over 3 years but this will be paid in full before the end of the contract, like this
It's referred as a 9 'plus' 27 (so in total 36 months) so like before take your £10,000 and divide by 9 'plus' 27 so back to £277.78
Now times by 9 = £2500.02
Then 27 months of = £277.78
So in total £10000 again but you now have paid the car back 9 months early, so you have a period of no rentals on the vehicle until the 3 years.
Is a bigger initial payment better?
It doesn't matter at all as a smaller or bigger initial payment results in the same total life cost of the agreement as you can see in the examples. It's up to you to decide whether you pay more upfront and less per month or less upfront and more per month.
It is used as a way for us to make our car leasing deals as flexible as possible, as we know everyone has individual motoring and budget needs.
Do you have any more questions on the initial payment? Please call 01565 880880 or email firstname.lastname@example.org and we will be more than happy to help.
When does an initial payment come out of my bank?
As a rule of thumb, the initial payment usually comes out between 1 and 3 weeks after you take delivery of the car, this is not a definite rule but an approximate. We deal with several finance companies whose payment schedules differ which means there is no answer that suits everyone.
As a broker, we will never be able to give an exact date.
For any and all specific finance questions once the contract is live it is advised to speak with the finance company direct.
Who is the initial payment paid to?
The initial payment is always paid to the finance company and never to All Car Leasing. Only the administration fee is paid to All Car Leasing.