The term security deposit, in car leasing, refers to a cash deposit made at the time of lease inception. The security deposit is returned at the end of the lease, less any charges that may be owed, say, for excessive mileage.

A security deposit should not be confused with a down payment (cap cost reduction), first or last month’s payment, or with other cash that may be due at lease signing.

Actually, very few leases require a security deposit, except possibly in cases in which the leasing customer may have poor credit.

Some lease finance companies offer a reduced finance rate (money factor) if a customer makes a security deposit. The larger the deposit, the lower the rate.