Do I Need to Pay a Deposit on a Hire Purchase Deal?
Is it necessary to pay a deposit to get a car on Hire Purchase? Or is there such a thing as a no-deposit car Hire Purchase deal? 🤔 If you’re not yet sure about whether you need to make a down payment for Hire Purchase to buy a car, don’t worry because we’ll explain to you how car finance works and why it’s more advantageous to pay a deposit when financing a vehicle.
And the lovely Jade has also prepared a video to help you decide....👇
What is a Hire Purchase Deposit?
A deposit in car finance is the initial amount of money you pay to start the car finance agreement. The amount you’ll put down is largely up to you, however, do note that if you’re looking to finance a more expensive vehicle, then it’s better to pay a substantial deposit so that your monthly instalments will be more affordable.
But how about a Hire Purchase no-deposit deal? Yes, you may have heard of lenders offering this type of arrangement. Generally, though, this is available only to car buyers with really strong credit scores. And while it may sound like a great deal, Hire Purchase 0 deposit arrangements usually come with interest rates that are a bit t higher, which means of course you’ll pay more throughout your car finance contract.
How Much Should I Pay as a Deposit?
As mentioned earlier, the exact amount you’ll pay as a deposit depends on you. However, most lenders might require at least 10% of the car’s value as the deposit amount. If you can afford to pay more, then it will be better for you because it will reduce the amount you have to pay for the monthly instalments. You’ll also pay less interest overall since you’re borrowing less money.
Do I Get My Deposit Back?
Some might be confused about car finance deposits and whether they’re refundable at the end of the Hire Purchase agreement. Deposits can be refundable in the context of renting a flat or if you’re hiring an item which you will then be returning hopefully in good condition. This is not the case with cars though. The car finance deposit is your initial lump sum payment towards meeting the cost of the car, so you can kick start the Hire Purchase agreement and drive the car home.
Hire Purchase Car Deals with No Deposit
What exactly does a zero-deposit Hire Purchase deal mean? This is a car finance deal where you can start using the car without having to pay any cash upfront. Yes, it’s possible to drive a car without having to put down any amount as a deposit at all. You only have to think about the monthly instalments on the car. It sounds like a really great offer but of course, it comes with some disadvantages.
You have to be prepared once the monthly instalments need to be paid because it’s not going to be cheap. You’re going to have to pay more every month if you get a no-deposit deal compared to paying a substantial deposit at the start of your car finance agreement. Since you’re borrowing more money from the car finance company, you’ll also pay more interest.
Also, for you to get a zero-deposit car finance deal, you need to have an outstanding credit score. Lenders will be protecting themselves from high-risk borrowers so they only offer this kind of deal to individuals who have great credit history and are good payers. But even if you have an excellent credit score and you’ve been offered a no deposit Hire Purchase deal, is it really worth it? If you don’t mind paying larger monthly instalments, then this just might work just fine for you.
What Cars Can I Get Without Deposit?
Zero-deposit car finance is available for new, nearly-new, pre-registered, and used cars alike, just like the usual Hire Purchase car finance arrangement. However, not all car finance companies offer this deal and even if the lender does provide a no-deposit car finance agreement, you still need to pass that particular lender’s requirement which is usually a really strong credit score.
How Do I Improve My Credit Score?
So, if you want to boost your credit score so you can get a no-deposit Hire Purchase car finance deal, you might have to be ready to change the way you handle your finances. Also, know that improving your credit score won’t happen overnight. It might take a number of months to a few years to get those points in.
To start, check your credit report to see if there are any errors in your personal details. Yes, even the tiniest inaccuracy can affect your credit score. If you spot any errors, contact the credit reference agency immediately and inform them about it. And while you’re checking your credit report, look at your past transactions and check if there are any seemingly fraudulent transactions made under your name. Alert the credit reference agency if you see any transactions you don’t recognise.
Other steps to improve your credit score involves paying off existing loans and debts. If you’ve had missed payments before or if you’ve previously defaulted on some loans, consider paying them off so that your account with those lenders can be settled. But be aware that if you’ve had a County Court Judgment on your credit report, the record can stay there for up to six years.
As you can see, it’s going to take work, time, and patience to boost your credit score so you have to be committed to this. But it will be worth it because if you have a strong credit score, you’ll have better chances of being offered finance products at lower interest rates. Remember, the higher your credit score, the lower the interest rate can be offered to you. And you just might be able to enjoy driving home your dream car without ever having to pay a deposit upfront.
Carmoola Zero Deposit Deals
If this is something you are interested in, then the good news is that you need look no further, Carmoola does offer good zero deposit deals. Simply download the app or reach out to us for more information. Let us help you drive away the car of your dreams today! 👍🚘