If you’re new to leasing, then we know there may be a few terms that you might not be familiar with which is why we’re committed to making dedicated guide and blog content that helps you understand these terms and leasing in general. In this article, we’ll focus on the initial rental – what it is, how much it will be, when you pay it and answers to the questions we’re most commonly asked by our customers.
What is the Initial Rental?
Every car lease will have an initial rental. It is simply the first payment you make on your lease agreement and will be part of your contractual lease payments.
This can be the same amount as your regular monthly payments or a larger payment depending on what the funder can offer and what you would prefer.
How is the Initial Rental Calculated?
The initial rental is calculated as a multiple of your monthly payments and will usually be one, three, six, nine or 12 times the amount of these. It’s calculated in this way as it is part of the total lease cost and is easier to break down the full lease cost into multiples of the same amount for both you and the funder.
Other Names for the Initial Rental
You might also see the initial rental referred to as the initial payment, down payment or a deposit.
Here at Xcite Car Leasing, we will never refer to this payment as a deposit as it is not a refundable payment and makes up part of your contractual rental payments for the lease agreement.
What’s the Difference between an Initial Rental and Lease Payment?
An initial rental is the first payment of the lease agreement and the main difference between this and the following lease payments will be the amount if you pay a larger initial rental.
How Much Will the Initial Rental Be?
The price of the initial rental will vary between leases as it is calculated as a multiple of the monthly payments. It will usually be the equivalent of one, three, six, nine or 12 monthly payments.
What is a Payment Profile?
A payment profile is the term used to describe the payment breakdown of your lease agreement.
For example, if you decide to take out a three year lease with an initial rental that is equivalent to six monthly payments it will be a payment profile of 6 + 35. The 6 refers to the initial rental payment and the 35 is the remainder of the monthly rental payments for the contract length.
Does My Credit Score Affect the Initial Rental Payment?
As a lease agreement is a financial product your credit will have an impact on whether you are approved for a lease and any conditions that may be placed on that approval. If you have a low credit score then one of the conditions that funders may require you to pay a larger initial rental. One reason that they do this is because it reduces the following monthly payments which makes them more affordable and places less financial strain on customers.
Is There Leasing Without Initial Rental Payments?
There is no such thing as a lease without an initial rental payment. However, you can choose to pay the same amount for the initial rental as the following monthly payments, and you may sometimes see a deal advertised as initial rental free payment because of this.
What Initial Rental Should I Choose?
You will be able to choose the best initial rental for your circumstances and our team are happy to help you if you have any questions about the profiles we’re advertising.
A few things we advise you consider when deciding on your initial rental amount include:
- How affordable an initial rental will be for you
- How much you want to be paying each month for the lease
- Any expected changes in circumstances that might impact your need for the funds
Ultimately, it is up to you to decide on the best initial rental payment for you as you’re the person who best knows your own finances and expected changes to the circumstances.
Is an Initial Rental a Deposit?
No, as we mentioned before we do not refer to the initial rental as a deposit as it is part of the total lease cost and so will not be refunded at the end of the agreement.
Do I Get the Initial Rental Payment Back?
No, you will not get the initial rental payment back once the lease begins or at the end of your lease agreement. The initial rental payment makes up part of the total lease cost and is not a refundable deposit.
When Do I Pay the Initial Rental?
When you make payment for the initial rental will depend on the lease funder.
Most of our funders will take the initial payment within 14 days of delivery, depending on when the vehicle is set live on their system. This will be taken from the account you have provided the details of for your direct debit to be set up for the lease agreement. We advise that you have the funds in your account for the day of delivery so that there is no concern for you about the payment being taken before you are ready.
However, there are a few funders who require payment to be made prior to delivery. If you are arranging a new lease with Xcite Car Leasing we will let you know early on in the process if the funder for a particular offer will require an upfront initial rental.
Who Do I Pay the Initial Rental To?
The initial rental will be paid to your lease funder. As we offer lease deals from all of the UK’s leading funders we cannot advise specifically in this article who you will pay but when you take out a lease agreement through us we will let you know the funder.
The main funders that we offer leases with are:
- ALD
- Alphabet
- Arval
- Lex
- LeasePlan
- Leasys
- Novuna
- RCI Financial Services (also known as Mobilize Financial Services)
- Santander
- Wessex Fleet
We also work with the manufacturer finance and you might get a lease funded by Mazda Finance or similar if we are able to get the best prices with them.
How Do I Pay My Initial Rental?
There are two main methods of paying your initial rental, bank transfer and direct debit. Most funders who take payment of the initial rental after delivery will take the payment automatically via the direct debit details provided. Whereas those who require payment prior to delivery will ask you to complete a bank transfer to them.
Can I Pay an Initial Rental Payment on Credit Card?
You will not usually be able to pay the initial rental amount on a credit card. This is because a lease agreement is a form of credit and you cannot use one form of credit to pay for another.
Will the Initial Rental be Affected by a Maintenance Package?
If you decide to add a maintenance package to your lease agreement then this will impact your monthly rentals and the initial payment. The additional maintenance payments will reflect the payment profile you have chosen so will increase the initial rental you have opted for.
What’s the Benefit of Paying a Larger Initial Rental?
The main benefit of paying a larger initial rental is that it will reduce the following monthly rentals as you will be paying a larger portion of the total lease cost up front. You’ll have more disposable income to spend on other expenses.
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