We hear you’re in the market for a new car! Well, congratulations – or perhaps commiserations if you were rather attached to your old vehicle. Personally, we feel that getting a new car should be an exciting process, although we understand why for some it can be daunting. It’s not all about picking our makes and models, there are serious financial implications to consider so it’s important to be smart with your budget so that your purchase is sustainable.
Most people in the market for a new car aren’t looking to purchase a vehicle outright, and with some of the price tags we see on newer models we aren’t surprised! Getting a car on finance with a monthly payment plan is becoming increasingly popular even for the youngest generation. It’s a great way to help build your credit score and maintain a positive one – as long as you can keep up with your payments of course.
But how can you make sure your payments are affordable? We know that one of the ways is to pick a car that is cheaper. Naturally this will decrease your monthly payments, but another is to increase your deposit. Although, in an independent study we carried out in January 2023 with 2000 car buyers, we found that 44 percent of them would currently struggle to find a deposit to help lower the cost of the vehicle.
Getting a car without a deposit
The important thing to remember is that you don’t always need to have a deposit. Not many people have a lump sum of cash saved up somewhere, so car dealerships aren’t expecting these as much anymore. If you don’t have any cash for a deposit, then it’s still worth heading to a dealership or using sites like ChooseMyCar.com to find out if you can still get a vehicle. Having a deposit is not always essential, and it’s always worth an ask!
Why is a deposit important for financing a car?
Ultimately, it’s not important to finance the car itself. The only reason why you may consider a deposit important is to reduce your monthly costs, or if your credit score isn’t good enough.
Here’s how to look at it. If you’re buying a car and you don’t put any deposit down, you may be rejected for the amount of money you’re trying to finance. Why? Because your credit score isn’t good enough and simply put – the computer says no. You can’t borrow this amount of money. So, how can you get around this? Put a deposit down in order to reduce your borrowing amount. Increase it as much as you can until the computer says ‘yes, you can borrow this amount’. You’ll notice that if you have a great credit score, you can certainly get away with not putting down a deposit at all.
Another reason you may consider a deposit important is to reduce your monthly repayments. When you purchase your car your monthly payments are worked out by dividing the total price of the car by the number of months in your agreement, plus interest of course. While your interest may vary and is not in your control, your monthly repayment figure can be manipulated. How? Yes, you guessed it, by having a deposit. Why? Because you’re borrowing less of course! Putting down a deposit means you’re paying less on your monthly repayment figure. It also means you end up paying less for the car as you pay less interest too. But this is another great reason to put down a deposit.
What happens if I have no deposit for my car purchase?
Nothing works out any different. There is no special plan for you. You can still choose from a hire purchase financial agreement or a PCP just like any other car buyer. All you need to have in place is a good credit score and a healthy budget for your repayment figure.
What type of finance plans are available with no deposit?
Getting a car on finance with no deposit does not put you in a different box. Your options for finance are still one of the following.
A PCP is a finance plan that has lower monthly payments because you do not own the car at the end of the agreement. Instead there will be a balloon payment on the car. This is typically anywhere between £3,000 and £9,000. You have the option at the end of your agreement to pay the balloon payment in full to the dealership, or hand your car back for a new one.
A hire purchase finance plan has a higher monthly repayment figure. This is because the balloon payment doesn’t exist and at the end of the plan you will own the car. This could potentially be your most expensive way to finance a car if you have no deposit and wish to own it after your agreement. So consider your budget carefully.
Looking for a new car or car finance?
If you’re looking for car finance deals or even finance on cars if you have bad credit, contact the ChooseMyCar team. Car finance with no deposit is an easy way to spread the cost of your car over time without a big upfront fee.
