Buying a new car is usually a significant financial commitment that not everyone can afford to pay upfront. No deposit car finance is a type of car financing that can help those who would be unable to make a large deposit. It’s worth bearing in mind that without a deposit, more of the loan will be charged in interest and fees. That’s something that you need to account for when looking at the affordability of the monthly payments, using online calculators for example.
Typically, you’ll need to pay a deposit of around 10% of the total vehicle price when taking out a hire purchase or personal contract purchase (PCP) finance arrangement. However, some lenders can offer you a no deposit car finance deal for both new and used vehicles. Here, we take a look at how this type of car finance works and why you might consider it.
No deposit car finance – how does it work?
In general, a no deposit car finance deal works the same as a traditional car finance arrangement. You’ll still have to pay monthly repayments, over a fixed term, until the vehicle is paid off. These repayments will include the cost of the car, plus any additional charges such as interest and admin fees. Because no deposit car finance involves a higher level of risk to the lender, interest rates are often slightly higher than for traditional car finance deals. However, this may not be a problem for you if you’re planning to buy the vehicle for a long period of time and intend to pay it off in full eventually. no deposit car finance