Used cars with no-deposit finance

Buy now and pay later with no-deposit car finance, which can help out when you don't have savings to spare

BuyaCar team
Apr 14, 2021

Whether you're purchasing a new or used car, chances are that it's available with no-deposit finance, which enables you to order it and take delivery, without having to make any finance payments in advance - just a standard reservation fee.

This can be helpful if you find yourself suddenly needing a car, but without the savings to put down a deposit. You’ll typically have the car for a month before needing to start monthly payments, which gives you some breathing space if your funds are tight initially. It's still important to make sure you can afford the car, though, as you'll have to make the payments every month until the end of the contract.

Whether you put down a deposit or not, you’ll still have the same amount to cover. However, the lower the deposit, the higher your monthly payments will be and the greater the amount of interest will be, as you're borrowing more money than you would be if you paid a deposit. In contrast, any deposit you make will reduce the amount that you borrow, cutting your monthly payments and interest costs. As a result, it's worth thinking about whether low upfront costs or low overall costs are more important to you.

Lenders typically require a strong credit score for you to take out no-deposit finance, as this is a higher risk for the finance company.

No-deposit car finance: how it works

All of the 48809 nearly-new or used cars currently advertised on BuyaCar is available with no-deposit finance. With BuyaCar, no-deposit car finance works like this; you find a car that you like and you can reserve it with a £199 fee. You'll then need to apply for finance and request a no-deposit quote.

Provided your application is accepted, you’ll take delivery of your car and the £199 reservation fee will be returned. There are normally 30 days from delivery until your first payment is due. You’ll then continue to make the monthly car finance payments until the end of the contract.

No-deposit car finance: types of finance

The two most popular types of car finance offer the option of no-deposit finance, so whether you're after the lowest possible monthly payments or the lowest overall cost to own the car, there's an option that should suit your needs.

PCP finance - which stands for Personal Contract Purchase - is the most flexible option and offers low monthly payments compared with the value of the car. That's because the monthly payments only cover part of the car's value - the amount it's expected to lose over the length of the contract.

So, you pay any deposit - or go for a no-deposit contract - make a series of monthly payments and then you have a choice; you can either hand the car back with nothing more to pay (provided you've kept the car in good condition and stuck to the pre-agreed mileage limit) or buy the vehicle by making the pre-agreed optional final payment set at the start of the contract.

Alternatively, if the car is worth more than the optional final payment, you can effectively trade it in for a new model, using any value over the remaining finance balance to put towards the deposit on your next car, reducing your future monthly payments. If you choose to make the optional final payment, however, the car is yours and you are free to keep it, trade it in or sell it. If you don't have enough cash but still want to own the car, however, you can also refinance the optional final payment.

Hire Purchase - also known as HP - meanwhile, features higher monthly payments, as these cover the entire value of the car, but as a result you pay less interest overall (as you're paying off the balance faster). You also automatically own the car once you've made the last monthly payment, with no large optional final payment as is the case with PCP. Once you've made the last payment - which is the same as the other instalments - the car is yours.

 

No-deposit used car finance: requirements

No-deposit finance isn’t for everybody because it does require a high credit score. That’s because lenders take a bigger risk at the beginning of the agreement than with an equivalent contract where the customer paid a deposit. With a no-deposit deal you borrow the whole value of the car and the interest to be paid back, while the car starts to lose value before you've made any payments.

If a customer falls behind on their payments with no-deposit finance, lenders are more likely to be left out of pocket than with a finance type where a deposit was made. As a result, interest rates are typically slightly higher for no-deposit finance; this is another way that lenders cover the increased risk.

The higher monthly payments also make it tougher to pass affordability tests - assessments that finance companies make to ensure that a borrower has enough income to cover the cost of the car loan.

That's why it usually pays to put down a deposit if you can do so; you're more likely to secure a better interest rate and end up paying less in the long run, while benefitting from lower monthly payments.

 

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

Used car prices start at £3,989 on BuyaCar, with finance from £80 per month. You’ll need to budget for higher monthly payments with no-deposit finance than the example costs shown on BuyaCar, as these assume a 10% deposit. However, if your financial position is good enough, all of these cars should be available with no-deposit finance.

Find a specific car that appeals to you on BuyaCar, click on the car and then you can head to the finance calculator, which lets you select the type of finance, deposit amount and mileage allowance to get a feel for what you can afford.

 

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