Initial Payment

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.

How does the initial payment work in a car leasing deal?

The initial payment is how much you can afford to pay in advance, kind of like a deposit as it is then deducted from the full lease amount allowing you to spread what’s left over the lease length. But that is the only similarity to a deposit, the initial payment is a different thing.

It’s different because you have a choice of how much you pay up front (3, 6, 9 or 12 months) and it is adjusted depending on the lease length you have selected and the annual mileage you need.

As you can see from the example below – the initial payment is 12 months, the monthly payment is £189.25 + VAT and the lease length selected is 24 months. You can see where the green box over the slider links down to the smaller green box which shows the amount that 12 months of £189.25 + VAT adds up to. This is how much your initial payment is.

This would make the first payment 12 x £189.25£2,271.00 + VAT. This is then followed by regular payments of £189.25 + VAT thereafter. Total cost: £6,623.75 + VAT.

 

 
As you can see on the next example below, the initial payment is 6 months or £1,370.43 + VAT, which is then deducted from the 24 month lease, so you spread 18 months over 23. By putting just 6 months down as an initial payment means your monthly rentals will be £228.41 + VAT, which you then multiply by 23 to get the total cost of the monthly rentals. £228.41 x 23 = £5,253.43 + VAT. Then add this to the initial payment amount of £1,370.43 and you’ll pay a total cost: £6,623.75 + VAT.

 

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 up front and less per month or less up front and more per month.

It is used as 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 [email protected] and we will be more than happy to help.