Need a new car but don’t have much saved up? You may be able to finance a car without having to pay anything upfront. Learn about 0 deposit car finance and how it works in our guide.
Need a new car but don’t have much saved up? You may be able to finance a car without having to pay anything upfront. Learn about 0 deposit car finance and how it works in our guide.
A deposit — also called an upfront payment — is an amount of money you pay to your lender at the start of your agreement. Putting down a deposit is common with many types of car finance.
Yes, it’s possible to get car finance without having to pay a deposit. Fewer lenders offer zero deposit agreements so it may take some digging. Why not get Experian to do the hard work? We help you compare deals from trusted providers in a matter of minutes. Comparing is free and won’t affect your credit score.
They’re quite different! If you see a 0 deposit deal, it means you don’t have to make an upfront payment at the start of your agreement. But 0% refers to interest — meaning a 0% car finance agreement won’t charge you interest for a set period.
Car finance with no deposit works a lot like other car finance — apart from there being no upfront payment. Don’t expect it to be cheaper because of this. In fact, the monthly payments are usually higher.
Hire Purchase (HP) agreements
Your monthly payments go towards interest and paying down the cost of the car. If you put down a deposit, the agreement starts with a chunk already paid off. For example, a 10% deposit on a £30,000 car means you only have to borrow and pay interest on £27,000. But with a zero deposit hire purchase deal, you’d need to borrow the full £30,000 — meaning there’s more to pay off and more interest to pay each month too.
Personal Contract Purchase (PCP)
With this type of agreement your monthly payments don’t go towards buying the car. They cover interest and the cost of depreciation (the drop in the car’s value as it gets older). A deposit pays a chunk of these costs upfront, making your monthly payments smaller than they would be with a 0 deposit PCP deal.
If you have money set aside, you may prefer to put down a deposit. It can make your monthly payments smaller and may help you get a cheaper hire purchase agreement. But it takes time to save up — and sometimes you need a car sooner than later. Zero deposit car finance can be useful if you don’t mind paying a bit extra. Just make sure there’s plenty of room in your budget for the repayments. Also, be aware that your application and any late payments will lower your credit score.
Avoid being refused credit by checking your chances of approval before applying. Experian calculates your eligibility based on your unique data when you search car finance with us. Searching is free, takes a few minutes and won’t affect your score.
One alternative is car finance that does require a deposit, which we’ve explored above. Another option is a car loan. Unlike HP and PCP agreements, a car loan lets you buy a vehicle outright. This means you own the car even while making the payments.
Not interested in car ownership? Then you may be better off with a car leasing agreement. You’ll make monthly payments to use the car but you won’t ever buy it.
If you’re getting your HPs muddled with your PCPs, try our handy car finance comparison tool to help you pick the right option for you.
With a PCP agreement, your monthly payments cover interest and the cost of depreciation. Depreciation is the drop in a car’s value as it gets older. You have three options when the deal ends. You can make a one-off payment to buy the car, give the car back, or exchange it for another.
With a HP agreement, there’s no option to give the car back or swap it. Your monthly payments go towards interest and the cost of the car. You’ll usually have to pay a one-off fee at the end of the agreement and after that you’ll own the car.
With a car leasing agreement, you’ll give the car back at the end of your deal. You may have to pay a fee if you go over the mileage limit or damage the car. Some lenders may allow you to extend your lease or start a new one.
It’s possible to find both new and used car finance without a deposit. As for the make, model and price, it really depends on what the dealer has available and what they’re willing to offer. You may find it harder to get approved for zero deposit car finance on more expensive cars.
If you miss a payment your lender may charge a penalty fee, default your account or even take legal action. It’s best to avoid late payments of course but sometimes life doesn’t go to plan. If you can’t help missing a payment, it’s often worth explaining your situation to your lender and talking about your options.
A missed payment will lower your credit score, making it harder to get approved for credit in the future. But there are ways you may be able to improve your score again.
Yes, it’s possible to get zero deposit car finance even if your credit score is low. But you may have to accept a smaller amount and higher interest rate to get approved. It’s worth looking for lenders who specifically offer car finance for bad credit — they may place more importance on things like your income instead of your credit score.
Experian helps you find the best car finance deals without affecting your credit score. Searching is free and takes less than two minutes. Plus, we’ll show you your chances of approval for certain offers including any deals you may be pre-approved for.
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