Car leasing, no deposit

Low monthly payments with nothing to pay upfront: car leasing with no deposit

BuyaCar team
Mar 10, 2020

If you're looking for the lowest monthly payments on a brand new car, then leasing may well be the answer. Car leasing essentially works like a long-term rental agreement and generally requires lower payments than other finance options. At the end of the term, you hand the car back and walk away.

Lease agreements often require you to pay an initial payment before the car is delivered. This is typically linked to the value of your monthly payments - some deals require the equivalent of one monthly payment; others may require the equivalent of nine. Generally, the more you pay upfront, the less you'll pay each month.

We don't offer leasing with no deposit here at BuyaCar but, if that's an important aspect for you, you can instead choose a Personal Contract Purchase (PCP) finance deal that follows a similar structure to leasing with some added flexibility. Our PCP finance explainers will give you all the details.

Unlike leasing, you can also use PCP finance for used car purchases, so it may be worth checking out if you fancy saving even more money on your next car.

No deposit lease-type finance - PCP finance

Like leasing, monthly payments in a PCP finance contract are low because these only cover part of the car's cost - the value that it's expected to lose over the course of the agreement, also known as depreciation.

At the end of a PCP agreement, you can return the car with nothing more to pay - just like leasing - but there's also the option to make the optional final payment to buy the car outright. Many drivers, however, choose to trade it in for another vehicle.

Unlike leasing, PCP finance is available on new and used cars and, depending on your credit rating, you may be eligible for no-deposit finance.

Car leasing with no deposit - what’s the catch?

With no deposit to pay, you’ll have at least a month to save before your monthly payments begin, and there’s no need to raid any of your savings to pay an initial deposit. However, you will be in a position where you won’t have paid off any of the car’s cost and this will mean that your monthly payments will be higher than if you had paid something upfront.

You’ll also pay more in interest because you’ll be borrowing the full cost of the car; any deposit would have been taken off your loan.

Finally, you’ll also be in a position of negative equity for longer. This is where you owe more than the car is worth. It’s only a problem if you want to return the car early (you’ll need to pay the difference if the car is worth less than you owe), or if the vehicle is written off, as the insurance pay-out may not cover a like-for-like replacement. In that situation, Gap insurance can be of use.

If you're in negative equity and looking to move into a new car, check out our guide to negative equity car finance.


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