Are lease deposits refundable? What is the difference between a deposit and an initial payment?
When you lease a car, you will have to put down an initial payment. This is also referred to an initial rental, or a deposit. It can also be called a down payment, it varies depending on who you talk to.
Many think they are interchangeable, and in the context of leasing they do essentially mean the same thing, but there are key differences that you should know about.
In this article, we are going to look at the difference between the two, and whether a lease deposit is refundable.
Are lease deposits refundable?
The deposit on a lease contract is not refundable. The money you put down at the start of the contract is for two reasons; to lower your monthly payments and to show extra strength in your finance proposal to the bank, and to eliminate the risk.The payment profile of your lease contract will not change, regardless of how much you put down initially. You can put down more initially and your monthly payments will be lower, or you can put less down initially and your monthly payments will be higher. Regardless of what you choose, you will still be paying the same amount over the duration of the contract. There might be a tiny difference in regards to interest rates and how much you pay monthly, but this is a very minute difference.So the deposit you pay is purely to lower your monthly payments, or to increase your chances of getting approved for finance.
What is the difference between the initial rental and the deposit?
There is no difference, but the use of the word deposit is technically incorrect.
The use of the word deposit in this context, the context of leasing, is incorrect because the word deposit implies ownership. And with leasing, you do not own the vehicle.
The only reason we use the word deposit is because society has started referring to it as a deposit and often society uses a word that is technically wrong but everyone knows what you mean. If that makes sense?
So essentially, the initial rental and the deposit mean the same thing, but they are technically different. It is not a deposit, it is an initial rental. However, people refer to it as a deposit because that’s just how it has worked out.
We will refer to it as an initial rental for the rest of the article, as that is technically the correct term.
How much will the initial rental be?
It usually depends on how much you want to put down. You will discuss your budget with your vehicle specialist and together you will decide how much you should put down as an initial rental.Some want to put down more initially so they have lower monthly payments. Others want to put less down initially and instead have higher monthly payments. Ultimately, it’s up to you. It depends on how much you have saved or how the monthly payments fit in with your monthly budget. However, your vehicle specialist will go through this with you to ensure that you are putting down enough so that your monthly payments are manageable. It should be noted that there might be one or two exceptions. The finance house might request you put down a certain amount. This could be for a number of reasons. For example, if you have a weaker credit score then you might be asked to put down more initially to eliminate the risk to the finance house. Other times, it could just be the policy of the finance house that you have to put down a certain amount.
Most of the time, however, it will be your choice as to how much you want to put down.
How can I pay for my initial rental?
You will usually be asked to pay via direct debit. This is the most common way of paying your initial rental and is fairly straightforward.
You may be able to pay by bank transfer or debit card but this will depend on the finance house. You may only be allowed to pay either by direct debit or by bank transfer. This is really down to things such as money laundering or anti-fraud regulations, as these regulations limit how much a finance house can take via a bank transfer or a debit card.
You cannot pay for your initial rental using cash or by credit card. If you have an administration fee, if you go through a vehicle broker, then you can pay for this by credit card. But you cannot pay your initial rental using cash or using your credit card.
When will I have to pay for my initial rental?
It depends on how you are going to pay for your initial rental. If you choose to pay via debit card then this will be made before you arrange a delivery date of your vehicle. Your vehicle specialist will contact you to take the payment and then arrange the delivery of your car.If you choose to pay using direct debit or bank transfer, then this can be done after your vehicle has been delivered. This can vary from seven to ten days after the vehicle has been delivered. However, each finance house has a different policy so your vehicle specialist should be able to tell you when you will have to pay by.
What happens if I can’t pay my initial rental?
If you cannot pay your initial rental then it depends on how you were going to pay in the first place.
If your debit card payment was declined, then you will be asked to provide a secondary method of payment. You will not be able to receive your vehicle until you have made the payment.
If you are going to pay by direct debit or bank transfer then the finance house will try and take the payment after your vehicle has been delivered. However, if they cannot take the initial rental then this will be considered a late payment. This will negatively impact on your credit score and if you continue to miss payments then you will be subject to repossession procedures. This will include repossession of the vehicle and the outstanding payments.
In conclusion, the deposit on your lease car is non-refundable. This is because it is an initial rental, and is simply referred to as a deposit. The initial rental is there to reduce the amount you pay monthly, or to strengthen your finance proposal. Usually, however, you can choose how much you put down as an initial rental. You can either put more down initially and reduce your monthly payments or you can put down less initially and have higher monthly payments. It is entirely up to you and your situation. Your vehicle specialist should go through your options with you and come to a decision as to how much you are going to put down. We help people decide on their initial rental every day, so if you are in doubt about anything we have mentioned in this article then please don’t hesitate to contact us.