Car Finance With No Deposit - Drive Now Pay Later

For many people, owning a car is a necessity, but the upfront costs can be a significant barrier for some. This is where car finance with no deposit comes in – an attractive option that allows you to get behind the wheel without having to save up a large sum for an initial down payment. 

In this article, we'll delve into the world of no deposit car finance, exploring how it works, the different types available, and the pros and cons to consider before signing on the dotted line. While the idea of driving away in a new car without putting any money down may seem like a dream come true, it's essential to understand the implications and potential risks involved first. 

Whether you're a first-time car buyer, someone with a less-than-perfect credit history, or simply looking to free up some cash, this guide will provide you with the knowledge you need about zero deposit finance. Read on to find out more… 

Do you have to pay a deposit to finance a car?

When financing a car, you may or may not have to pay a deposit, depending on the type of finance agreement agreed with the lender and your individual circumstances.

Here are a few examples:

Personal Contract Purchase car finance with no deposit

With a Personal Contract Purchase deal (also known as PCP), you usually need to pay a deposit, which is typically around 10% of the car's value. However, some dealerships may offer no-deposit deals so it’s well worth exploring if this is an option.

Hire Purchase car finance with no deposit

Similar to PCP, Hire Purchase (also known as HP) agreements often require a deposit, but the upfront amount can vary. Depending on the provider, some deals may allow you to finance the entire cost of the car without a deposit so it’s always worth checking.

Personal Contract Hire car finance with no deposit  

Personal Contract Hire (also known as PCH) is a form of leasing whereby you essentially rent the car for a set period of time. You'll usually need to pay an initial rental fee, but this won’t necessarily be the same as putting down a large deposit on an agreement where you can own the car at the end like a PCP or HP deal. 

What is no deposit car finance?

No deposit car finance - also known as zero deposit car finance - is a type of car financing agreement where you are not required to put down any upfront payment to secure the loan. This means you can spread the entire cost of the vehicle over a series of monthly payments without having to save up for an initial deposit.

While no deposit car finance can be appealing, it's essential to carefully consider your budget and the total cost of the agreement over its lifetime. Compare different finance options and lenders to find the most suitable and affordable deal for your circumstances. Below, we’ve shared the advantages and disadvantages of a no deposit car finance deal:

No deposit car finance pros and cons 

How does no deposit car finance work?

No deposit car finance works similarly to a traditional car finance agreement but without the need for an upfront payment. Here's a step-by-step breakdown of how it typically works:

Step 1 - Choose your car

Decide on the make and model of the car you want to purchase, ensuring that your choice of vehicle fits within your budget and what you’re able to afford each month. 

Step 2 - Check your eligibility

Lenders will need to assess your eligibility for finance based on factors such as your credit score, income, and debt-to-income ratio. For no deposit finance, the criteria may be stricter so you’ll need to make sure you have a steady income and good credit score before applying.

Step 3 - Apply for finance

If you meet the eligibility criteria, you can apply for a no deposit finance agreement. You'll need to provide personal and financial information, so only go ahead with the application if you can meet the requirements of the lender. 

Step 4 - Await approval

If your application is approved by the lender, you'll be offered a finance agreement detailing the terms, including the interest rate, monthly payments, and duration of the agreement.

Step 5 - Sign the agreement

After carefully reviewing and agreeing to the terms, you will need to sign the finance agreement to get the wheels in motion and your car ordered.

Step 6 - Complete car delivery

Once the paperwork is complete and the car available, you can take delivery of your new vehicle. You’ll usually have the option to either collect it from the dealership or have it delivered to you.

Step 7 - Make monthly payments

You'll start making monthly payments as per the agreement which will cover the full cost of the car, plus interest and any fees owed as part of the deal.

Step 8 - End of agreement

Depending on the type of no deposit finance deal (e.g., PCP, HP, or PCH), at the end of the agreement, you'll either make a final balloon payment to own the car outright, hand the car back, or trade it in for a new one.

Bear in mind that while no deposit car finance can be a convenient solution, it may result in higher monthly payments and potentially higher overall costs due to the higher interest rate. Always carefully consider your budget and read the terms of the agreement before signing up for any type of finance deal.

Can I get no deposit car finance if I have poor credit?

Being approved for no deposit car finance with poor or bad credit can be challenging as lenders typically view this as a higher risk. However, it's not impossible, and there are a few options you can consider:

Subprime lenders

Some lenders specialise in providing car finance to people with poor credit. These are known as subprime lenders and they may be more willing to offer no deposit deals, but in return they often charge higher interest rates to offset the increased risk.

Guarantor finance

If you have a family member or friend with good credit who is willing to act as a guarantor, you may be able to secure a no deposit deal. The guarantor agrees to make the payments if you can't, reducing the risk for the lender.

Saving for a deposit

If you can't find a suitable zero deposit deal, consider saving up for a deposit may be your best (and only) solution. Even a small down payment can improve your chances of getting approved and may help you secure a better interest rate.

Before applying for any kind of car finance, it's a good idea to check your credit report and take steps to improve your credit score, such as paying bills on time and reducing outstanding debt. Be cautious of lenders who guarantee approval regardless of your credit history, as they may charge extremely high interest rates.

What details do I need to provide for no deposit car finance?

When applying for no deposit car finance deals in the UK, you'll need to provide a number of personal details and financial documents for the lender to see in order to approve or deny your application. Typically, these will include:

• Personal information - Full name, date of birth, current address and previous addresses (if you've lived at your current address for less than three years), plus contact details such as phone number and email.
• Employment and income details - Employment status (employed, self-employed, retired, etc.), employer's name and contact information, job title and length of employment, annual income and any additional sources of income. 
• Bank details - Bank name, account number and sort code, including the length of time you’ve been a customer. 
• Identification and proof of address - Valid form of ID (such as a passport or driving licence), proof of current address (this may be a utility bill, bank statement, or council tax bill dated within the last three months).
• Driving licence details - Licence number and type of licence (full or provisional)
• Vehicle details (if you've already chosen a car) - Make and model, registration number, vehicle identification number (VIN), current mileage, and the purchase price. 

Depending on the lender and your individual circumstances, you may also need to provide the following additional information:

• Recent payslips or P60 form to verify your income
• Three months' worth of bank statements to demonstrate affordability
• A SA302 form or tax returns if you're self-employed
• Details of any existing financial commitments (loans, credit cards, etc.)

The specific requirements may vary between lenders, so it's best to check with the provider you're considering to ensure you have all the necessary information and documents ready when applying for zero deposit car finance.

FAQs and Answers

We hope our guide to car finance with no deposit has proven useful. Want to know more? Please refer to the section below where we address the most frequently asked questions about zero deposit car finance:

Is it easier to get a car on finance with a deposit?

Yes, it is generally easier to get a car on finance if you have a deposit. This is because a deposit demonstrates your financial commitment to the purchase and also reduces the amount you need to borrow from the lender. If you prove to be of lower risk, you are more likely to get approved for car finance. While no deposit car finance can be a convenient option for some, it's important to remember that having a deposit (10% of the car’s value is recommended) can make the car financing process easier and potentially save you money in the long run.  

How likely are you to be accepted for no deposit car finance?

The likelihood of being accepted for no deposit car finance depends on several factors, including your credit score, income, debt-to-income ratio, and the lender's specific criteria. In general, getting approved for zero deposit finance can be more challenging than finance deals that require a deposit. Remember, even if you are accepted for no deposit car finance, it's crucial to ensure that the monthly payments are affordable and sustainable for your budget over the entire term of the agreement.

Do car finance companies check your bank account?

Yes, car finance companies may check your bank account as part of their assessment process. Some lenders will ask to see your bank statements, while others may only request them if they need additional information to make a lending decision.

What credit score is needed to finance a car UK?

In the UK, there are three main credit reference agencies (CRAs) that lenders work with to assess your credit score. They are Experian, Equifax, and TransUnion - each has its own credit scoring system but having a higher credit score generally improves your chances of being approved for car finance and can help you secure better interest rates too. Credit scores range from 0 to 999, so a good credit score is usually between 670 to 881. 

What documents do I need for finance on a car?

When applying for car finance, you'll typically need to provide several documents to the lender. These documents help the lender assess your identity, income, and ability to make the monthly payments. Common documents required include a passport or driving licence, utility bills and bank statements, payslips, or tax returns if you’re self-employed. It's best to check with the specific lender you're considering to get a full list of the documents they require for your car finance application. Having all the necessary paperwork ready can help streamline the application process and improve your chances of a quick approval.

Why would my car finance be declined?

There are several reasons why your car finance application might be declined, including; poor credit history, insufficient income, high debt-to-income ratio, not being employed, incorrect or incomplete information, or too many credit applications. If your car finance application is declined, don't be discouraged. You can take steps to improve your chances of approval in the future, such as bettering your credit score, saving for a larger deposit, finding a guarantor, or choosing a less expensive vehicle to finance. Before reapplying for car finance, it's a good idea to speak with the lender and ask for feedback on why your application was declined.

Is it worth paying off car finance early?

Whether paying off your car finance early is worth it depends on your individual circumstances and the terms of your finance agreement. Some lenders charge a fee for settling your car finance agreement early so always check your contract for any early repayment penalties and factor these into your decision first.

Car finance at your fingertips

If you're considering financing a car, Wilsons Epsom should be at the top of your list. As a well-established, multi-franchise dealership located in Surrey, we offer an extensive range of new and used vehicles from leading brands, ensuring that you'll find the perfect car to suit your needs and preferences. 

Our experienced finance team is dedicated to providing tailored, flexible finance solutions to make your car ownership dreams a reality, whether you're looking for a traditional Hire Purchase agreement, a Personal Contract Purchase, or a no deposit finance option, we can help. Get in touch to find out more.