When you lease a motor vehicle of any type you will agree a payment plan as part of your car lease contract.
This plan requires you to make an initial payment or first repayment before you take receipt of your new car.
This initial payment is for the use of the vehicle for the first month.
After the first month, the payments will reduce to a consistent fixed monthly amount.
This method of payment is known as a payment profile.
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Your car lease payment profile is made up of an initial payment, and subsequent fixed monthly payments.
The initial payment is usually a multiple of your fixed monthly payment.
Let’s assume you require a 36-month (3 year contract term), and your monthly payments for your chosen car are £300.
Your payment profile could typically be 3 x £300 ( £900 initial payment) and 35 x £300 (fixed monthly payments).
Your first payment and the 35 subsequent monthly payments add up to 36 monthly payments – the length of your lease agreement.
This could also be written as 3 + 35.
There are a number of factors that influence the level of the initial payment.
CVS need to mitigate its risk relating to the motor vehicle, and the individual or business that wants to lease the vehicle.
Examples that affect risk relating to the vehicle include:
How much you will be required to pay initially will affect the amount of the remaining monthly payments. For example – the higher the initial payment, the lower the remaining monthly payments will be. This is a method that finance companies use to manage the overall risk in the financial arrangement.