No deposit car finance
Can I get No deposit car finance?
Yep! No deposit car finance is a standard car finance option among most lenders nowadays.
It’s time to swap your car in for something newer, or perhaps you’ve just passed your test and looking to get your first car. Anyhow, those savings you have tucked away can pay for the deposit.
But hang on. Maybe you don’t want to splurge your hard-saved cash on a deposit for the car. Good news! You probably won’t have to because most lenders now offer No deposit car finance, even to new and younger drivers.
However, there is a catch. For the privilege of not paying a deposit, you’ll probably need to pay a higher interest rate than you would if you put a deposit down.
Read on to find out everything you need about No deposit car finance!
What is no deposit finance?
Typically when buying a car on finance, the lender will ask the question of paying a deposit. A deposit can be cash or, more likely, the value of a vehicle if you part exchange.
On the plus side, opting to pay a deposit will increase your chances of getting approved for finance and reduce the overall amount of your loan and the monthly repayments.
However, no car to trade in or money available for an initial deposit is the bonus of No deposit car finance deals.
What car finance options come with No deposit?
When choosing car finance with No deposit, you have two types of finance available. No deposit car finance can come with HP or PCP agreements.
PCP car deals with no deposit are more flexible than HP when the contract ends. Typically with a Personal Contract Purchase, you’ll pay fixed monthly repayments. At the end of the loan, you have options to give the vehicle back, pay the GMFV (balloon) or take on a new agreement using any equity in the previous deal towards a deposit for the new car.
If you return the vehicle, terms and conditions apply. You’ll have to keep within the mileage limit and ensure no damage occurs to the car to avoid additional charges.
Pros and cons of no deposit car finance
As with all things in life, there are pros and cons to No deposit car finance deals. However, we can’t think of many!
- The positive of a No deposit finance is you to buy a car without having to stomp up a hefty deposit. If you have the deposit money in the bank, it can remain there, and if you don’t have the cash for an initial payment, it doesn’t matter.
- However, swings and roundabouts, the negative of taking out a No deposit car loan is you’ll have more to pay back each month. And you’ll end up paying additional interest charges.
We recommend deciding on a monthly budget you will be happy with over the contract term. If you cannot reach this on a no-deposit car finance deal, you might want to consider saving for a deposit, which will lower your monthly repayments.
How do you secure a No deposit agreement when you have bad credit?
Owning a bad credit profile can be frustrating, especially when you see that stylish-looking car sitting on the forecourt winking its lights back at you.
You don’t have the cash to buy the vehicle outright. Most people don’t. However, even raising a deposit is a non-starter at the moment.
It is all very frustrating. You can afford the repayments. If only you did not have to pay a deposit. You need a No deposit car finance arrangement.
Many lenders, including online car finance brokers, often specialise in providing people with a bad credit score No deposit car finance deals.
However, suppose you have financial difficulties, such as a CCJ or IVA. In that case, you could struggle to find a No deposit finance deal.
Potential lenders will conduct an affordability check comparing your monthly income v outgoings. To satisfy themselves, you have the means to make the monthly repayments on a No deposit car finance deal.
Work out your affordability before you apply. Consider that although you are not paying a deposit, that might initially make the deal more affordable. Your monthly payments are more for a No deposit deal. Also, with a No deposit loan, APR Interest rates are higher.
Representative example of a No deposit HP car finance deal
Our example below is for an HP deal with No deposit. You can click here for a representative PCP deal.
Representative example of how a No deposit HP finance deal works
We have picked a popular new driver’s car from the Autotrader website. A Renault Clio 1.2 16V Dynamique MediaNav 5dr 2015 White with 66,000 miles on the clock.
Car priced at £6,000 May 2022
Deposit: £ ZERO
Option to purchase fee (to transfer ownership to you at the end of the term): £100
48 Monthly HP payments: £143.40
Total Interest charged: £883.20
Total amount payable: £6983.20
Figures from the moneycalculator.com – 05/2022
It must be said. If you put a deposit down, the lender will view you as a less risky proposition: as you’re effectively borrowing less from them. You are more likely to get finance with a bad credit score when you put down a deposit.
Why use us for your car finance?
We can find you a quote with no impact on your credit score.
Whatever car you’re searching for, a new or used car, be it a Citycar, Supermini, Hatchback, Mini-MPV or something else! We help you find the best No deposit car finance deal. We work with Carfinance247, whose large panel of Lenders cater for all types of credit profiles. You’ll get your manager to explain your options.
Can I get out of a car finance deal early?
Getting out of a car finance deal is possible, but it’s not always straightforward.
In the case of a Personal Contract Purchase (PCP) and Hire Purchase (HP) deal, you can terminate voluntarily. If you’ve already paid half of the cost of the car – or you decide to make up the difference until half of the vehicle is paid off – you can return the car. The Consumer Credit Act 1974 applies regardless of your lender.
With a Hire Purchase, this isn’t ideal. Remember, an HP requires higher monthly repayments because you’re paying to own the car. Handing the car back halfway through is not the best financial decision. However, if needs must, and you can no longer afford the car, at least you have an option.
No Deposit Car Finance FAQs
How much can I borrow without a deposit?It's all on the lender. If you meet their credit and affordability checks, there is no maximum amount you can borrow with No deposit. £100,000 would probably be the most you could get.
Which cars can I get on a No deposit car finance deal?You can get virtually any car (that you can afford) on 0-deposit car finance deals. If you're looking to buy new, you might find that some manufacturers offer No deposit PCP deals when new cars are available as a way to entice you to conduct business with them. Of course, the downside is that a new car is significantly more expensive than a reliable used car. So while you might not pay a deposit, you could be spending a lot more over the contract term for the privilege of driving a new car.
Can I get car finance with no deposit if I have bad credit?No deposit finance deals are readably available. Still, it will ultimately depend on the lender's criteria and your credit history. You might find getting a No deposit car finance deal a little challenging with a poor credit score. However, that doesn't mean it's not possible.
How long is a No deposit car finance deal?Remember, you can get a no deposit on most car finance deals, such as Hire Purchase (HP) and Personal Contract Purchase (PCP). These deals tend to last between two and five years. Naturally, the longer the term, the longer you keep the car, and the less you pay monthly! Flip side the shorter the time you borrow, the less the cost of credit.
What do lenders check for with a No deposit car finance deal?Finance Companies will first want to see your credit score from a CRA. If that is acceptable, they will consider their criteria to decide if you are eligible with them for a No deposit car finance deal. The lender will want to see your income and outgoings as an affordability check. Whilst a good credit score should get you a loan, the amount is decided by how much you can afford. Missed payments, CCJs or IVAs, can make financing a car with No deposit challenging.
Can I keep the car once paying off the No deposit finance deal?Yes but! It depends! If you've opted for a PCP or HP deal, yes, you have an option to own the car at the end of the term. For PCP car deals, you'll need to pay off a (very sizeable) balloon payment to own the vehicle. Usually, several thousand pounds and isn't often a popular option. A hire purchase car deal is slightly different, as it's essentially paying off the loan to own the car.
Can I get car finance with no deposit if I'm under 18?If you're under 18, you can't get car finance at all! In the UK, you need to be at least 18 to be able to take out a finance agreement. When you are 18, you'll be able to find some finance deals with no deposit, but you will find it harder than an older driver. You're likely to have a poorer (or simply a non-existent) credit score.
How can I apply for No deposit car finance?Applying for No deposit car finance is a relatively simple process. Firstly, you'll need to find a lender or comparison site. From there, simply apply by entering your information, and specify what your budget is. In general, you'll have to give some personal information - like earnings, total household income, debt, outgoings, and address information. Before you can be accepted, you'll have to go through a credit check. While having good credit is ideal when you're looking to buy a car, it's not always possible. Thankfully, there are plenty of zero-deposit car finance options out there. Just be aware you will likely have higher interest rates, and your total payable amount will be more than a lower interest rate.