Not everyone will be able to obtain a car finance deal without a deposit. The most popular kinds of car finance deals are hire purchases (HP) and personal contract purchases (PCP). Lending you money without a deposit upfront and lending you a larger sum overall is high risk for the lender, and they want to be assured of your reliability. Car finance refers to any arrangement that allows you to purchase a vehicle without having to pay the full amount upfront.

91% of new cars in the UK are now bought through some kind of finance deal. Both these generally involve an upfront payment, or deposit, of around 10% of a vehicle’s purchase price.

Can I get a car finance deal without a deposit?

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p>Cars can be expensive. A no deposit car finance deal can get you on the road quickly and allow you to spread the cost of a new vehicle equally across the loan term. At the end of the term, if you’ve stayed on top of your repayments, you own the vehicle outright.

But if you don’t have the £3,000 required as a deposit to buy a new vehicle on finance, what do you do? Luckily there are a few options for financing a car purchase without putting down any money upfront. However, you’ll invariably end up paying higher bills each month. Below we examine how financing a car without a deposit works and why you might – or might not – want to consider one of these car finance deals.

The most common way to get car financing without a deposit is through a PCP arrangement. Therefore, you’ll have to demonstrate a higher income to meet the affordability criteria for car finance deals without a deposit. To reflect this risk, you’ll also face higher interest rates if you’re borrowing without a deposit.

A deposit of around 10% of a vehicle’s price is typical, for both hire purchase and personal contract purchase finance arrangements. But even on a finance plan, while you won’t have to stump up the whole price of the car in one you, you will usually need to pay some upfront costs. You can also obtain a personal loan and use the money to pay for a new car. HP agreements without deposits are very rare. Instead you have a choice – to return the car, make a balloon payment and purchase it, or transfer to a new PCP arrangement for the vehicle.

The only exception would be for perhaps a reservation fee of a couple hundred pounds. PCPs also usually require a deposit of around 10%. It may seem Mercedes-benz e200 2013 in ghana unbelievable, but you can drive a new car off quite often without handing over any money upfront. With HP, you put down a deposit and then repay the loan amount, plus interest and fees, over the agreed term.

But what if you don’t have the money? There are some options for getting a car finance deal without a deposit. This is why people tend to look at buying cars on finance, spreading the cost over a few years. Typically, you’ll need a good credit score and a history of regular payments on loans, including car finance arrangements, to be eligible.

With PCP, you make monthly payments for the use of the car, but you don’t own the vehicle outright at the end of the term. If you don’t put down a deposit, you’ll have to borrow more for the vehicle and thus will face higher monthly payments. In fact, you typically won’t have to make a payment for 30 days, until your first repayment is due. However, because you’re not using the vehicle itself as security on the loan, you’ll face higher interest rates. A brand new car will easily set you back upwards of £30k, and though most of us buy used, that still involves parting with a few thousand – money that not many of us have just lying around.

These loans will also typically come with higher interest rates and thus higher costs overall. Additionally, lenders will put all applicants for car finance through affordability tests to ensure they can comfortably afford the monthly repayments. Personal loans typically don’t require upfront payments.