No Deposit Car Leasing Explained
"No deposit car leasing" is one of the most searched phrases in leasing, and one of the most misunderstood. Here is what it really means for a business, so you can judge the deals you see against the facts.
There is no deposit in contract hire
When you buy a car on finance, you often pay a deposit. Contract hire works differently. You pay an initial rental at the start of the agreement, which is a set number of monthly payments paid up front. It is also called an advance rental.
So when people talk about no deposit leasing, they usually mean the lowest possible payment at the start. On our deals, the lowest option is 1 initial rental, which means one monthly payment up front. That is not zero. We do not offer a lease with nothing at all to pay at the start, and any deal that suggests otherwise deserves a closer look at the small print.
How advance rentals work
The number of initial rentals changes your monthly rental. You can choose 1, 3, 6, 9 or 12 on each deal page:
- Fewer initial rentals means a smaller payment at the start, but a higher monthly rental.
- More initial rentals means a bigger payment at the start, but a lower monthly rental.
The reason is simple. The funder needs to recover the same overall amount across the agreement. If you pay more early, less is spread across the remaining months, and the reverse is also true.
Our prices start on 9 initial rentals, so if you want the lowest payment at the start, you will need to change the setting to 1 in the configurator and look at the monthly rental it gives you.
Look at the whole cost
A low payment at the start is not the same as a cheaper lease. Take two quotes for the same car, term and mileage. One has 1 initial rental and a higher monthly rental. The other has 12 and a lower monthly rental. Add the initial rental to all the monthly rentals across the term, and compare the totals. Fewer initial rentals can leave you paying more overall, and you are paying for the benefit of keeping cash in your account at the start.
Who benefits
A low initial rental tends to suit:
- Start-ups and young businesses that need to protect cash while they build up trade.
- Cash-flow-tight businesses that would rather spend money on stock, wages or marketing.
- Businesses with variable income that find a bigger single payment awkward to time.
If cash is not tight, a higher number of initial rentals can reduce your monthly outgoings, which some businesses prefer.
VAT and credit
VAT is charged on the initial rental as well as the monthly rentals. A VAT-registered business can usually reclaim 50% of the VAT on car rentals where the car has any private use. Check the detail with your accountant.
Every application is subject to status and a credit check. The funder assesses each application on its own merits, using your credit history and, for a company, its accounts and trading record. Approval is never guaranteed, and credit applications can leave a record on your credit file, so apply for the car you actually want rather than for several at once.
The honest answer
No deposit car leasing, in the sense of paying nothing at the start, does not exist in contract hire. What does exist is a choice of how much to pay up front, and the trade-off against the monthly rental. Our car leasing page explains the basics, and you can see the current deals on our no deposit car leasing page, where each deal lets you set the initial rentals to 1.
If you are new to leasing, start with what is contract hire, and read how to calculate car lease costs to understand what goes into the price.
Swiss Vans Ltd is authorised and regulated by the Financial Conduct Authority as a credit broker, not a lender. FRN 668283.