Take this as an example… You have £1500 to put down as a deposit on your new car. Normally, that amount would be subtracted from the price of the car and your monthly payments are calculated accordingly. The bigger the deposit, the lower the monthly payment.
If a manufacturer or a dealer is offering a £2000 deposit contribution, it gets added to your £1500 deposit. Therefore £3500 is taken off the full price of the car and your monthly payments are calculated accordingly.
Be aware that there may be a minimum amount of money you have to finance. Or, to put it another way, a maximum deposit amount you can put down, inclusive of the contribution.
In some cases the contribution is paid back to the customer following delivery of the vehicle but before the full initial rental amount is taken by the finance company.
There are a number of reasons why deposit contributions are offered. A car manufacturer/dealer may periodically offer them across a number of cars as a means of drumming up sales at a time of year that usually sees a slump. They may be offered on a model that is not selling as well as hoped, or to clear stock of a model that is going out of production. Essentially, they are offered to tempt customers to buy their cars over a competitor’s and to tempt customers into taking out a finance product.
Be aware that deposit contribution offers are usually time-limited.