How Can I Get No Deposit Finance?Can I Get Car Finance Without Putting Down a Deposit?
So, you want a new car. And you’ve decided you want to go through car finance to do this. When you go through car finance you will have to put down a deposit.
This is typically about 10-30% of the car’s value at the time. Except, what if you don’t have the deposit?
Is there a way to get finance without a deposit?
We understand that not everyone will want to put down a deposit. This could be for any reason, from not wanting to spend that much money in one hit to wanting to spend it on something else. This is why we’ve written an article on your options for getting car finance without a deposit.
Can I Get Car Finance Without Putting Down a Deposit?
In reality, there is no car finance option that does not require a deposit.
That does not mean it’s not possible, however. There are three ways you can get car finance if you do not have the deposit. And those are;
- A personal loan
- A made up deposit
- 100% funding
Of course, we’ll be talking about those in more depth in this article.
What Finance Agreement Can I Get With No Deposit?
How Can I Get No Deposit Car Finance With a Personal Loan?
Your first option for getting no deposit car finance is taking out a personal loan.
A personal loan is when you borrow money from a bank, building society or a lender. You agree to a series of terms and conditions, and pay a certain amount back each month over an agreed period of time.
There are two types of personal loan;
What is a secured loan?
If you choose a secured loan, you will have to put down something called collateral. Basically, this is the most expensive item you own. Which would usually be your car. If you default on a payment and can’t pay them back, the lender will take this piece of collateral.
What is an unsecured loan?
With an unsecured loan, you do not have to put down collateral. This means that the lender is trusting you to make the repayments based on your credit rating alone.
Both types of loan will come with an Annual Percentage Rate (APR). This will tell you how much you will be repaying, so it’s vital you check this before you take out the loan. Essentially;
The higher the percentage, the more you will have to repay.
What are the pros to taking out a personal loan?
- The main reason is that you don’t have to put down a deposit
- This is because in the eyes of the dealership or the vehicle supplier, you are paying for your vehicle in cash. So, there’s no need for a deposit.
- The car will be yours to own outright
How Can I Get No Deposit Car Finance With a Made Up Deposit?
A made up deposit is when your dealership or broker gives you the deposit.
Of course, you don’t just get it for free. They do this by taking off the discount of the vehicle, and using it as the deposit. Make sense? Let me give you an example;
Say you want to buy a Ford Fiesta for £18000. But, you negotiate a £1000 discount. Your supplier could tell the funder that you are buying the car for £18000 and you can use that extra money as the deposit.
This is done because when an underwriter looks at agreeing a car or van loan, they don’t just look at your credit score but also the vehicle you are buying. Typically, they will not lend more than the Recommended Retail Price. So, if you are borrowing less than the full price, the underwriter is happy and you have not had to come up with the deposit.
This can also be done with used cars. The motor industry has two main ways of valuing a car. One of those is through a company called Glasses Guide, and another from a company called CAP. Both of them provide data about trade and retail values of every used car. So, the general rule is that you can’t borrow more than 90-95% of the Retail Price of the car. As long as your supplier can put together the figures that tick the finance house requirements, they can make the deposit for you.
How Can I Get No Deposit Car Finance with 100% Funding?
Your final option is to get 100% funding. This is when more specialised dealers or suppliers will have relationships with finance houses who will lend up to 110% of the value of the vehicle with no deposit.
If you go through this route, the finance house will be looking at two things;
- How quickly the vehicle you want to buy is going to depreciate
- So, if you want a car that will depreciate quickly, they probably aren’t going to say yes. A very respectable family car that depreciates slowly? They’ll more than likely approve it.
- If you have a very exceptional credit score
- Experian will score up to 999 so if your credit score is 950 or higher, then the chances are you will be approved.
However, it should be stressed that many do not have access to this. So, do not rely on this as your first and final option.
So, there are some of the ways you can get car finance without a deposit. As you can see, there are ways, but it can be difficult and isn’t always the best option. It’s something you really have to think about carefully before you decide that this is the route you want to go down.
Andrew has been in the motor trade for over 20 years. What he enjoys most about his job is the team spirit and the dedication of his work colleagues. He also appreciates the teams input in the improvement of the company.
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