How Much Deposit Do I Need for Car Finance?
If you're considering a new finance deal, you may need to pay a car finance deposit before getting access to your car. Paying a lump sum upfront may be uncomfortable at first, but a deposit could make your monthly payments more affordable, streamlining the finance process in the long run.
If you're reading this guide, your luck is in.
With experience in the world of car finance, we've created this page to give you all the information you might need about car finance deposits.
However, if you decide you need a little more advice from our team before committing to a vehicle, you can get in touch here.
How does car finance work with a deposit?
A car finance deposit is pretty similar to any other type of deposit you might be required to pay. You may be asked to pay a deposit before taking out a new finance deal, regardless of the car you're buying.
In the past, you may have paid a deposit for something before. A car finance deposit works in much the same way - you'll pay an upfront sum of money to secure the sale of your vehicle. Once your deposit is paid, the dealer will save your car for you, providing you still want to carry on with your purchase. However, your deposit isn’t just about holding your car. It also enables you to receive a cheaper finance agreement which could save money on your monthly payments, as you’re technically paying part of the cost of your car loan upfront.
Is a car finance deposit refundable?
In some cases, your car finance deposit may not be refundable, but this is lender dependent, so it's a good idea to check. If you decide you don't want to go ahead with your finance agreement, in some cases this means you could lose your money. However, your deposit will be held against the value of your vehicle - the more you pay upfront, the less you'll pay later on.
Depending on the lender, you could receive your deposit back before you've received your car.
Find out more about your car buying rights here.
How much deposit do I need for car finance?
The deposit amount that you may you need to put down for car finance will depend on several factors:
Your credit score and your previous borrowing history
The model and age of the car you'd like
Whether you’d like a new or used car
What you’d like your repayments to look like
Whether you foresee any changes to your financial situation in the future
Whether you choose HP (Hire Purchase) or PCP (Personal Contract Purchase) finance
Some people pay want to pay a deposit of 10% of the total cost of the car, but at the end of the day, it's really about what you're comfortable with. If you'd like to try and lower your monthly payments, paying a large deposit could be a good idea.
Another thing to consider is the type of finance you’d like. With Hire Purchase (HP) finance, you'll usually be required to pay a higher deposit. On the other hand, with Personal Contract Purchase (PCP) finance, the deposit amount will often be lower. This is because, with PCP deals, the value of the car is deferred into the optional final payment (known as a balloon payment) at the end of your PCP finance.
Don't forget that you'll also have to pay interest on your repayments - putting a greater deposit down could reduce the amount of interest you pay further down the line.
Is it easier to get car finance with a large deposit?
In most cases, putting down a larger deposit could make it easier to get car finance, as there’s less risk involved for the lender - particularly if you have bad credit. If you've got a poor credit score or you've been refused car finance in the past, a larger deposit may signal more trust to your lenders. Credit is subject to status.
If you have a decent credit history and you'd rather spread your money out, you could be find a suitable car finance deal with a deposit of 10%. In some cases, you may be able to get finance loans with no deposit, although understandably your monthly repayments will be higher in these situations.
Can I get a car on finance without a deposit?
Yes, it is still possible to get car finance without a deposit!
However, whilst a deposit isn't always required, it may increase your chances of being approved, as well as reducing the amount of interest you will pay. You may be approved for no-deposit car finance with a good credit score, but it's not completely out of the question if your rating isn't quite up to scratch.
Give our team a call today and see if you could be eligible for no-deposit car finance.
What is the 10 percent rule for car finance?
If you've been browsing through your car finance options for a while, you may have come across something called the 10% rule.
Essentially, the 10% rule states that you should spend 10% of your desired vehicle’s worth on your deposit to get the best deal.
Of course, you don't have to adhere to this rule, but if you're not sure how much to spend on your car, they may be of use.
I am looking for car finance. Can I use my old car as a deposit?
If you already have a car and you'd like a new one, you can use your old car as a deposit. This is called part-exchanging,and it's much easier if you own your old car outright. However, if you have a car finance deal at the moment and you'd like to get a new vehicle, you could also consider refinancing.
With a refinance deal, the balance owed on your old contract is rolled into your new agreement, although this could make it more expensive, depending on how much you have left to pay. Refinancing tends to be more popular with PCP deals than HP loans, as many people choose to refinance the balloon payment.
If you own your old car, you can avoid refinancing altogether. Your dealer will assess the value of your car and reduce the cost of your next vehicle, based on how much your old car is worth. You may find that this money is taken off your deposit, or it could be taken from the remainder of the loan, which might make your monthly repayments more affordable. As such, it’s worth getting a few quotes first to make sure you're getting a good deal for your car.
Ready to see what your ideal deposit could look like? Just request a quote on our homepage and we'll try to help you find your next vehicle.
-
Do you need to put a deposit down when buying a car?
No, you don't necessarily need to put a deposit down when buying a car. Whether you have an excellent, poor or good credit score, there may be no deposit options available. However, you may find that having a deposit is more cost-effective in the long run, as it may reduce your monthly payments and the overall costs of the loan, including the optional final payment at the end of your PCP agreement.
-
What is a deposit contribution for a used car?
When searching for a new car, you may see the words deposit contribution crop up occasionally. If your vehicle of choice is described as having a deposit contribution, it means that the dealer has included a set amount of money towards the deposit for you.
If that sounds too good to be true, there's often a catch - you usually have to opt for a specific finance product to buy the vehicle, instead of choosing between HP or PCP finance. There may also be a minimum car value that needs to be charged or a maximum deposit allowance too. On the other hand, a deposit contribution finance agreement may be ideal for some people, as the dealer's donation will be taken off the total cost of the car.
-
How much deposit do I need for a used car?
It's a well-known fact that new cars start to depreciate as soon as they drive off the forecourt, sometimes losing around 40% of their value by the end of their first year. As such, buying a used car is usually going to be cheaper, meaning you'll may need to put less of a deposit down for the same vehicle.
It's could still be worth adhering to the 10% deposit rule though, although 10% of the cost of a used car will naturally be cheaper than 10% of a new car anyway.
-
Is a holding deposit on a car refundable?
Whilst a holding deposit could be refundable, there may be some instances where it is non-refundable. If the dealer sells the car to someone else after you've paid a holding deposit, they may be required to refund you in full.
You may get the money back when you return to the dealer to make your purchase - it could be either refunded or deducted from the cost of the car. If you put down a holding deposit and decide you don't want the car later on, it could mean the dealer might not refund you.
-
What type of car finance does not require a deposit?
There are three main types of car finance:
- Hire Purchase (HP) deals
- Personal Contract Purchase (PCP) deals
- Personal loans
Whilst most types of finance can require a deposit, some lenders will be able to offer you no-deposit car finance under one of the options mentioned above. At Car Finance 247, we are proud to state that some of our lenders specialise in no-deposit car finance, so we may be able to help you find the perfect deal for your circumstances!
Just get in touch and we'll see if we can help.
-
Can I change my mind after paying a deposit on a car?
In most cases, holding deposits are placed as part of a contract in which you agree to buy the car. Of course, you can back out if you wish, but you may not get your money back.
Put simply: You should ensure you're ready to buy your car before you put your deposit down, unless you don’t mind potentially losing your money.