No Deposit Car Financing: How Does It Work?

No Deposit Car Financing: How Does It Work?

12 October 2019 Saturday 17:05
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No Deposit Car Financing: How Does It Work?

It may sound too good to be true but financing a car without a deposit is possible. Ideally, most financing deals require a down payment. But many car financing companies today have ‘no deposit’ offers to entice customers to own their dream car.

Car financing and how it works

Whether you pay a deposit or not, different car financing schemes have the same underlying principles. Financing a car means that you are purchasing the vehicle by making monthly payments over a set period. Some popular financing agreements include personal contract purchase and hire purchase.

When financing a car, you do not own the vehicle until you have paid the full price indicated in the agreement. The affordable monthly payments, despite the interest, is what makes financing an excellent choice for people who do not have the cash to buy a car outright. In some financing schemes, the agreement works like a lease. At the end of the term, you can either return the vehicle, pay the balloon payment, or renew the contract.

Most financing deals require at least a 10% deposit. What can you do if you are strapped for cash? That brings us to the solution, which is car financing with no deposit.

How to finance a car with no deposit?

Depending on your current circumstances, no deposit car finance may be the solution you need to own a car. Not only do you get to drive away a brand-new vehicle, but you also get to keep your cash for a more important expense.

There is nothing complicated about these deals. Car financing companies offer no deposit car financing as a way to remain competitive in the market. However, no deposit deals are not available on all kinds of financing agreements. In most cases, you can only get a no deposit car finance through a personal contract purchase.

Another option is by financing your car through a personal loan. Usually, dealerships will no longer require a deposit if you take out a personal loan to pay for the vehicle.

Advantages and disadvantages of no deposit car finance

No deposit car finance does not significantly restrict your cash flow. However, a PCP means you are technically leasing the car. At the end of the agreement, you will need to return the car or renew the contract. Generally, monthly payments for PCP car financing tend to be lower. But, not paying a deposit also means you are paying more over an extended period.

If you choose to consider paying the balloon payment at the end of the contract, not paying a deposit means the balloon payment is also more significant.

Indeed, deals where you do not pay a deposit sound tempting. There are definite advantages, especially when your budget is tight, but there are also considerations you need to make. Before you sign a car financing agreement without paying a deposit, make sure you understand the implications. Carefully check the terms and conditions as well as all the restrictions. If possible, compute how much you will pay over time, and determine whether you are paying more or indeed saving money on the deal.


Updated: 11.10.2019 23:06


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