One of the commonly asked questions (and most searched for queries) in this industry relates to a no initial rental (no deposit) style lease car arrangement. To confirm, in most cases it is perfectly possible (and legitimate) to lease a new car on a no deposit basis. However, before making any firm conclusions, you need to consider a few relevant points which should help you in this process.
Most credit brokers/ contract hire companies will advertise with a higher initial rental, generally a “6-spread” arrangement. For reference, depending upon the financial product you choose, the first amount payable will be known either as the Initial Rental or the Initial Payment. For usership (non-ownership style) products such as contract hire CarLease UK describe this as an Initial Rental. For ownership style products like personal contract purchase (PCP) and finance lease CarLease UK describe this as an Initial Payment.
Please note that in both cases the amounts payable are NOT Refundable Deposits. Any monies paid will form part of the funding arrangements and will not be returned to you at the end of the contract – CarLease UK do try avoid (or clarify) the term “deposit” for completeness.
If you do see a 6-spread initial rental on an advertisement and the monthly-rental is £100 (including or excluding Vat) then this will mean that a customer would have to pay £600 (including or excluding Vat) either on the day of delivery or more commonly 7-10 days afterwards. This is almost always taken by direct debit. Some modern websites will allow you to change the initial rental (deposit) to an amount which is more suitable for your requirements. You will notice that the lower the initial rental, the higher the monthly rental will become. Do not be perturbed by this; you are not getting a “worse” deal. The total amount payable on the agreement is actually the same because contract hire is not an interest-led product. Therefore there is no cost-saving with a higher initial rental. Fundamentally, you are choosing an initial rental which will be suitable for the requirements for you or the business.
A no initial rental / no deposit leasing option is a big consideration for those drivers using a car allowance from their employer. With the growing company car tax rates and also with contract hire due to become an “on-balance sheet”, many employers are converting their fleet into a car allowance or, for drivers who cannot use “eco” options, employees are opting-out of the scheme. While a car allowance is a great benefit, as an employee is given a flat amount per month a higher-initial arrangement is not always ideal. Many car allowance users will be trying to work towards 24, 36 or 48 flat rentals which include the vehicle and all servicing, maintenance and tyres (funder-maintained). For many businesses, cash-flow is king and undertaking to take vehicles which a high initial rental/deposit is not always a pragmatic option.
For personal customers who are not receiving a car allowance, it is still possible to look at a no-initial rental / no deposit contract hire transaction. To manage everything effectively, identify this to your credit broker/contract hire company at the outset. The issue is that some companies do not offer a no initial rental/deposit approach; in some cases a finance company will only proceed with an initial rental of a “3 spread” or more. This is down to the credit criteria of the finance company. You also need to be aware that by having a no initial rental, you must have positive credit. As contract hire and leasing are credit based products, you must undertake a credit check before you are able to procure a vehicle. With zero deposit, you are effectively asking for more credit from the finance company and so the underwriting criteria will be stricter. This means that this is NOT appropriate for those with poor/bad credit.
For more infomation on car leasing without a deposit or minus and initial payment check out the range of vehicles currently on special offer and be sure to ask a member of the CarLease UK team about this upon making a quote request. You can also learn more about car leasing in our help and advice pages or read real life car reviews in our car blog.