Does Car Leasing Have Upfront Fees? And How Much Are They?

After you've chosen a car and have decided to on leasing as your finance method of choice, what do you do next? Well, like most finance methods, leasing has an 'upfront fee', in this case called an initial payment. This is different from a deposit because you're not actually buying the car.

Here’s my attempt at trying to explain what an initial payment actually is and how it slots into a car budget.

What is an initial payment?

When you take out a car lease like a Personal Contract Hire agreement or a Business Contract Hire agreement you’ll have to put down a thing called the initial payment. I know it can be easy to think of this as a deposit but technically it isn’t.

The initial payment is an amount that you can pay up-front at the start of the agreement to reduce the cost of your overall lease in the long term. Because the total amount you pay over a lease is always the same, the more money that you put into an initial payment, the less the cost of your monthly lease payments.

Sometimes your finance company will say that you have to put down an amount over a specific value, especially if your credit record isn’t too good.

Usually, you’ll be given a choice of four options:

  • paying 3 months of the agreement upfront
  • paying 6 months of the agreement upfront
  • paying 9 months of the agreement upfront
  • paying 12 months of the agreement upfront

The amount that you choose to pay is completely up to you.

How do you pay for an initial payment?

Anti-money laundering legislation means that you won’t be able to put down the initial payment using using cash. Instead, you’ll be asked to pay using a direct debit or a bank transfer.

If you’re paying using direct debit and bank transfer, the initial payment will be taken after your car is delivered.