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No deposit car finance

Car finance could help you spread the cost of buying a car, but many deals require a deposit. If you can’t afford to pay up front, your options may feel limited. 

With a no deposit car finance deal, you could get a new or used car without dipping into your savings. Here’s how they work.

Car finance could help you spread the cost of buying a car, but many deals require a deposit. If you can’t afford to pay up front, your options may feel limited. 

With a no deposit car finance deal, you could get a new or used car without dipping into your savings. Here’s how they work.

Written by
Sajni Shah
Consumer expert on money and utilities
Posted
3 JUNE 2024
8 min read
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What is no deposit car finance? 

With a no deposit car finance deal, the entire cost of the car you’re buying will be financed through monthly repayments. That means that you won’t have to pay a deposit upfront to drive your new car off the lot.

Also known as 0 deposit car finance, it could be an option if you’re in the market for a new car but struggling to scrape together the lump sum to put down upfront. Maybe, for example, you need to replace your car quickly, and don’t have time to save up for the deposit.

But because you’ll be borrowing more, you’ll pay more in interest overall, and you can expect your monthly payments to be higher. So it’s important to make sure you can comfortably afford the repayments. 

Not all lenders offer zero deposit car finance deals, and whether you’re able to secure a no deposit deal depends on factors including your credit history and affordability, as well as the car you want to buy.

Types of zero deposit car finance deals

There are a few main ways you can finance buying a car without putting down a deposit:

Personal contract purchase

With a personal contract purchase (PCP) car agreement, you’ll make monthly payments over a set period time to cover what the lender believes the car will lose in value by the end of the agreement, plus interest. 

At the end of the contract, you can choose to either:

  • Return the car and walk away
  • Part exchange it and use any equity you’ve built up as the deposit for a PCP agreement on a new car
  • Make a one-off ‘balloon payment’ to buy the car

Although PCP car agreements typically come with a deposit, there are zero deposit options available for eligible customers. How much you’ll pay back each month depends on how much you put down upfront, the interest rate you’re charged, and the length of the contract. 

Because you’re not paying off the full value of the vehicle, the monthly payments could be lower than with other car finance deals. However, there may be other conditions imposed on the deal, such as sticking to an agreed mileage limit. And you could be charged extra for any ‘excessive’ wear and tear. 

Hire purchase 

With a hire purchase (HP) agreement, you essentially hire the car from the car finance company until you reach the end of the deal. Once you make the final payment, along with any final fees, the car is yours to keep. 

With HP car finance deals, the car is used as security for the loan. If you fail to make the repayments, the car could be repossessed and – as is the case with any missed credit payments – your credit rating will take a dive. 

Your monthly repayments could be higher with an HP agreement because you’re paying off the full value of the car, plus interest. Paying a lump sum upfront can help reduce your monthly payments, but it isn’t always necessary. 

An HP car finance deal could be an option if you want to own your car at the end of the contract. That’s because, compared to a PCP agreement, you won’t have to pay a large one-off payment to buy the car at the end of the contract.   

Personal loan

If your credit score is good, you could instead look at taking out a personal loan to finance a car purchase. With a personal loan, you could borrow the money you need to buy the car outright and then spread the cost over several years. And you won’t need to pay a deposit. 

Because you’ll own the car outright, you’ll be able to sell and modify your new car from day one, without having to wait for the contract to end. And in terms of overall costs, if you have a good credit score, it could work out cheaper than a no deposit car finance deal. 

See how much you could borrow with a personal loan.

What are the pros and cons of zero deposit car finance?

A no deposit car finance deal could be a tempting option if you can’t spare the cash to pay a lump sum upfront, but there are advantages and disadvantages to consider:

Pros

  • No upfront costs: you could get a new car straight away, rather than having to wait to save up for the deposit.
  • Different options available: you can choose between a hire purchase or personal contract purchase car finance deal, depending on what best suits your needs. Or you can take out a loan to buy the car. 
  • Possibility to use your car as part exchange: you may be able to trade in your old car and use the equity as a deposit.

Cons

  • You’ll pay more each month: without a deposit you’ll have to borrow more to finance the car, which means your monthly repayments will be higher. 
  • You’ll pay more overall: the more money you borrow to finance your car, the more you’ll have to pay back overall in interest. 
  • Less choice: some lenders will not give you a finance deal without a deposit unless you have a good or excellent credit score.

How does buying a car on finance with no deposit work?

If you’re interested in buying a car on finance but you don’t have enough cash in the bank for a deposit, a good first step is to see if you could be eligible for no deposit car finance. We’ve partnered with Car Finance 247, to help you compare car finance deals from a range of providers, based on your personal circumstances. 

Apply with Car Finance 247 and a soft search of your credit file will be used to see what deals you could be approved for in principle. You can then compare factors like the interest rate and the terms of the financing, as well as the required deposit, to see which of the applicable deals works best for you.

Once you’ve got your financing lined up, you can choose a car that fits the lender’s criteria. Car Finance 247 will get on with the paperwork and square things away with the lender and the dealer. But the lender will need to do a hard check of your credit history before you’re officially approved.

Can you get no deposit car finance with bad credit?

You may be able to find a bad credit car finance deal with no deposit, although your options will be more limited. Lenders typically reserve their best rates and deals for customers with higher credit scores. 

Any lender offering you car finance will want to be assured that you can afford to make the repayments and pay them back. So choosing a cheaper car and borrowing less could improve your chances of getting approved.

Are there alternatives to no deposit car finance?

Low deposit car finance

If you’re able to cobble together a small deposit, that could be better than no deposit at all. Having even a low deposit could make you less risky and more affordable in the eyes of a lender, so it could increase your options.

A low deposit car finance deal will typically cost you less overall too. Because you’ll be borrowing less, your monthly repayments should be lower, and you’ll pay less in interest over the life of the finance agreement. 

But it’s only an option if you can afford it. Stretching yourself too thin to scrape together a deposit could have bad financial consequences too. 

Zero interest car financing

They’re not particularly common, but you’ll occasionally see 0% APR deals offered by manufacturers to encourage customers to buy their latest model. You can find 0% interest deals for both PCP and HP finance agreements, and they effectively mean you spread the cost of a new car, without paying interest. 

As well as being pretty rare, you’ll typically need a strong credit score to get a zero-interest car finance deal. You’ll also likely need to put down a larger deposit. And with potentially inflated prices and extra fees, it may not always be the best deal. Make sure you fully understand the terms before you sign up.   

No deposit car leasing

There’s also the option of leasing a car long-term. Many companies offer zero deposit car leasing so you can get behind the wheel of a brand-new car without a big upfront payment. 

With long-term car leasing, you’ll pay a set amount each month over the length of your contract. You can often pay extra to include maintenance and even road tax in your package too, to avoid any unexpected repair bills or MOT costs. 

The main downside of zero deposit car leasing is that you won’t build up any equity in the car. When the contract is up, you’ll hand back the keys and have nothing to show for it. You’ll also have to stick to set mileage restrictions or face extra costs.

How can you find cheap car finance with no deposit?

The car finance deals that are available to you will depend on your personal circumstances and credit history as well as the type of car you want to buy. So if you’re looking for cheap car finance deals with no deposit, you’ll want to cast a wide net and see what’s out there. 

Our partner, leading car finance broker Car Finance 247 can help with that. Simply provide a few details about you and the car you’re looking for, and in a matter of minutes you can see what car financing options you could be approved for from the panel of providers. 

What’s more, you’ll get a dedicated account manager to help guide you along the way.

Compare car finance deals

Frequently asked questions

Can you get no deposit finance on a used car?

You could get zero deposit finance to buy a used car, but the question of whether you’re eligible is at the discretion of the lender. They’ll look at factors like your personal circumstances and credit rating to decide what car financing deals to offer you.

Compare car finance with our partner Car Finance 247 and you can see what used car financing you could be approved for in principle from a range of providers, without it affecting your credit score.

Are there any restrictions on no deposit car finance deals?

As with any kind of borrowing, to qualify for no deposit car finance, you’ll need to meet the lender’s affordability criteria. Certain lenders, for example, may have limits on how much they’ll finance without a deposit, or they may reserve their zero deposit deals for customers with a good or excellent credit score.

There are also certain extra restrictions to be aware of when taking out a Personal Contract Purchase (PCP) finance agreement, regardless of whether you pay a deposit. PCP finance deals typically impose mileage limits, and if you go over the limit or the car is damaged beyond what they consider normal wear and tear, you could be charged extra at the end of your agreement.

What cars are available with zero deposit finance?

You could find zero deposit finance for a range of cars, new and used, depending on your personal circumstances. You’ll typically need a good credit score to qualify for no deposit car finance and some lenders have restrictions on the age and mileage of the cars they’ll finance.

If you compare car finance with our partners Car Finance 247 and you’re approved in principle for a no deposit deal, you’ll be paired with an account manager who can talk you through the types of cars you could get.

Can I get no deposit, no credit check car finance?

You’ll need to pass a credit check to get any kind of car finance. When you apply, the lender will do a hard check on your credit history to confirm your identity, check how much you currently owe, and see how you’ve handled debt in the past.

You can, however, see what car finance you’re likely to be approved for, without it affecting your credit score, through our partner Car Finance 247. When you apply for a quote, a soft search on your credit file will be used to see what deals you could be eligible for from the panel of providers.

Sajni Shah - Consumer expert on utilities and money

Sajni is passionate about building products, allowing Compare the Market to help you make great financial decisions. She keeps track of the latest trends and evolving markets to find new ways to help you save money.

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