How to get van finance with no deposit
Need a van to support your growing business, but strapped for cash? Zero-deposit finance could be an option. Read on to find out more
While it’s handy to save up for a deposit when you’re looking for a van to cut your monthly payments, it’s not always possible. Perhaps you’re just starting out with a new business and cashflow is tight. Or maybe your old van has let you down and you need a new vehicle in double-quick time.
Fortunately, whether you’re looking to take out finance for a used van or a brand new one, it’s likely that you’ll be able to find a no-deposit van finance deal, meaning you can get your business moving for very little upfront cost.
Whatever type of vehicle finance you take out, it's worth bearing in mind that if you don’t pay any deposit, this will increase your monthly payments, as there's more cost to cover over the course of the finance agreement. This also means that your interest payments will be higher, as you're effectively borrowing more money. If you make a deposit, meanwhile, you instantly cut out the interest that would have been charged on borrowing that amount, saving a few extra pounds.
In order to be accepted for a zero-deposit van finance deal, you’ll also need to have a decent credit score. Lenders will consider no-deposit deals to be a higher-risk bet - as you're borrowing more money on the same vehicle. So they’ll see a customer with a better credit rating as less likely to encounter problems with making payments and a more attractive prospect.
How no-deposit van finance works
Normally, you’ll need to pay a small reservation fee to secure a vehicle - which is not the same as a deposit - and then you can apply for the finance. Once you’ve had your application for finance confirmed then you’ll either need to organise a date for delivery of the van to you, or a day to collect it.
Generally, you won’t find you need to pay the first monthly payment until 30 days after you’ve taken delivery. For brand new vans you will normally find that finance is arranged via manufacturer schemes directly, while for used vans you may go through other third-party finance brokers.
What’s required to get no-deposit van finance
While exactly what you need to be approved for zero-deposit van finance can vary, one of the most important requirements is that you have a good credit score. This is because a proven track record of paying back credit, plus a stable financial history makes you less of a risk in the eyes of lenders
When you apply for van finance you’ll also need to complete a form to prove that the finance you’re applying for is affordable - this is inevitably a trickier test to pass if you have no deposit, because the monthly payments for your van will end up being higher.
Types of van finance available with no deposit
The most common types of finance available for vans with zero deposit are Personal Contract Purchase (PCP) and Hire Purchase (HP). They work in different ways, with PCP offering lower monthly payments and Hire Purchase working out cheaper overall for those who want to own the van at the end of the contract (assuming the same contract length and deposit).
PCP van finance with zero deposit
PCP is a popular form of finance for both vans and cars, because it’s a flexible form of paying for the use of a vehicle. Since the deposit (if you make one) and the monthly payments only cover the amount of value the van is expected to lose during the length of the contract, PCP deals are cheaper on a monthly payment basis than most other types of finance for a vehicle of an equivalent value.
At the end of the finance agreement, you can choose to hand the van back to the finance company and walk away, with nothing more to pay (provided you’ve kept to the agreed mileage limit and the van remains in good condition with no damage beyond fair wear and tear), or you buy the vehicle outright by making the large optional final payment.
There is a third option, too. If the van is worth more than the optional final payment, then the difference between the optional final payment and the van’s actual value - known as equity - can be put towards the deposit on a new vehicle. The more equity you have, the more it will reduce monthly payments on your next vehicle.
PCP deals are a popular way to finance a new van, but they are increasingly a viable option for used van models, too, though generally they are only available for vehicles up to five or six years old.
HP van finance with zero deposit
The monthly payments with Hire Purchase agreements are higher than with PCP deals, because they cover the whole value of the van and once the final payment is made, you automatically own the van, and you can keep it or sell it on at this stage, with nothing more to pay to the finance company.
*Representative PCP finance - Ford Fiesta:
48 monthly payments of £192
Mileage limit: 8,000 per year
Optional final payment to buy car: £2,923
Total amount payable to buy car: £11,926
Total cost of credit: £2,426
Amount borrowed: £9,500
BuyaCar is a credit broker, not a lender. Our rates start from 6.9% APR. The rate you are offered will depend on your individual circumstances.