No-deposit car finance: how it works

Getting car finance without a deposit means you don’t need any cash upfront – but it does mean your monthly payments will be higher

BuyaCar team
Mar 9, 2021

If you want to get hold of a new or used car without any upfront payments, then a no-deposit deal is what you’ll need. But it’s not entirely without its downsides.

No-deposit finance can be a useful route to go down if you need a new car but don’t have much spare cash around or don’t want to delve into your savings pot. And apart from a reservation fee, you generally won’t have to pay anything for around a month after you’ve received your new car.

This can be a helpful aspect of zero-deposit finance, as it could mean you could get together some extra savings before the monthly payments start for your car. Be aware, however, that a no-deposit route generally costs more overall, as you'll be borrowing more money. This in turn increases the overall interest cost and the monthly payments.

You’ll also need to have a strong credit score, as lenders often reserve no-deposit finance for customers with the highest ratings. That's because you're borrowing more money with this option and with nothing put down upfront, it takes longer until the lender gets its money back.

No-deposit car finance: how it works

If you're financing a nearly-new or used car through BuyaCar, then you'll normally reserve it with a £199 reservation fee and apply for finance, with the option to request a no-deposit quote.

Once accepted, you won't need to make any payments before the car arrives. When it is delivered, you'll then have 30 days before your first monthly payment is collected. Your £199 reservation fee is also refunded to you during this stage.

For new cars, finance is normally arranged through manufacturer schemes, which usually work in a similar way. Just remember that whatever happens, you'll need to be able to make the monthly payments every month from this date onwards. If you can't, you could get into financial difficulties.

No-deposit car finance: types of finance

A number of popular types of car finance are available with a no-deposit option. These include PCP finance, which is how more than 90% of new cars are paid for. It's flexible and more affordable than some other finance options because your monthly payments only cover part of the car's cost (the value that it's expected to lose during the agreement).

At the end you can return the car with nothing left to pay (provided you've stuck to the pre-agreed mileage limit and kept the car in good condition) and walk away or buy it for a lump sum known as the optional final payment, which can be refinanced.

If the vehicle is worth more than the optional final payment, then you'll also have the option of trading it in for another one, with the difference - known as equity - put towards the deposit on your next finance agreement. The more equity your car has to put towards the deposit on your next car, the more it reduces monthly payments on this car.

Hire Purchase finance is also a possibility. This has higher monthly payments than PCP, but your monthly payments cover the full value of the car. This means that - unlike with PCP - you automatically own the car once you've made the final monthly payment, with no large lump sum left to pay. This means you can keep it or sell it at this stage.

No-deposit car finance: requirements

The precise requirements to be approved for no-deposit finance vary depending upon the lender, but the biggest requirement is a strong credit score. No-deposit finance is generally only offered to consumers who have a good credit rating, and a proven record of paying back credit on time.

Everyone seeking finance is put through an affordability test to ensure that the payments won't put them into financial difficulties. The test becomes harder to pass without a deposit because the monthly payments on a no-deposit loan are higher.

Interest rates may even be higher if you don't put down a deposit, too, because it involves borrowing more money. This makes it harder for finance companies to recover the debt if you have repayment problems - particularly near the beginning of the agreement, when the car is typically worth less than the total amount owed.

That's why it usually pays to put down a deposit if you can do so: you're more likely to secure a lower interest rate and end up paying less in the long run.

No-deposit car finance: which cars can I get?

Used, nearly new, and pre-registered models are all available with no-deposit car finance from BuyaCar. If the car is in stock and you're accepted by a lender, no-deposit car finance is an option. Brand new cars which have been built, but not registered, may also be available with zero-deposit finance.

Manufacturers regularly offer no-deposit options on brand new cars that are built to your specification. You'll need to configure a car and then ask for details about finance offers. This is a quick way to get very high monthly payments, though, as purchasing a car brand new is typically the most expensive way to buy a car and putting down no deposit increases monthly payments further.


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