No-deposit car finance: how it works

Get a car now and pay for it later with no-deposit car finance

BuyaCar team
Jul 31, 2019

No-deposit car finance can enable you to get a new or used car without having to make any payments in advance - apart from a standard reservation fee.

It's particularly useful when you need to replace your vehicle but don't have spare cash to hand or would rather not raid your savings account. You'll typically receive your car and won't have anything to pay for almost a month before repayments start with BuyaCar.

This option can buy you time in order to accrue some savings before you start paying for your car in monthly instalments.

However, this option is usually more expensive in the long run, as you'll be borrowing more money than if you had put down a deposit, which increases the overall interest costs and the monthly payments will be higher, too. You’ll also need to have a strong credit score, as lenders often reserve no-deposit finance for customers with the highest ratings.


No-deposit car finance: how it works

If you're buying a nearly-new or used car through BuyaCar, then you'll normally reserve it with a £199 reservation fee and apply for finance, requesting 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.


No-deposit car finance: types of finance

The most popular types of car finance are available with a no-deposit option.

This includes Personal Contract Purchase (PCP), 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 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 cost of buying it, then you'll also have the option of trading it in for another one. The difference - known as equity - can be put towards the deposit on another finance agreement, for example, reducing your monthly payments at this stage.

Hire Purchase finance is also a possibility. This has higher monthly payments than PCP, but at the end of the agreement the car you've paid off the whole value of the car and become the legal owner. 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 profile. 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 repayments 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 there are repayment problems - particularly near the beginning of the agreement, when the car is often worth less than the amount owed.

That's why it usually pays to put down a deposit of 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, are also eligible.

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.


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