Can I Get a Zero Down Payment Car Loan in the UK?

If you’ve ever bought a car before you'll know that they can be extremely expensive both to purchase and to run. Most new cars won't cost you less than £30,000 and that's just what it costs to buy. It's therefore totally understandable that most car buyers in the UK opt for car finance, in order to spread out the cost of such a daunting purchase.

However, though it's a cost-efficient and practical solution, car finance still involves some upfront costs. Depending on which car finance deal you go for, a deposit of approximately 10% will usually be required. What happens if you don't have the money? Are there may still some options available for you to get car finance without having to put down a deposit? Let's examine how a zero down payment car loan works and why you might want to consider it.

What is a Deposit? 

In car finance, a deposit is a sum of money that you pay upfront in order to secure the purchase of a car. With most car finance agreements, you'll be required to pay a deposit before you can access the loan. This deposit will usually represent 10% of the price of your car. 

You may be wondering, can I get my deposit back? Well, you have a 14-day cooling-off period which starts from the day you sign your contract within which you can cancel your agreement. During this period of time, you are allowed to withdraw from the car finance agreement and your deposit should be refunded to your account. However, you should check the fine print before signing any agreement, in case there's a special clause for the refund of deposits within the cooling-off period. 

What happens if you can't afford to pay 10% of the cost of your car up front? Well, there are a few options you can choose from.

Can You Get A Car Loan With No Down Payment

No deposit car finance will allow you to drive off from the dealership with a brand-new (or used) car without having paid any money whatsoever. It sounds absolutely bonkers, but these types of agreements will let you buy a car and delay the payment for 30 days. You'll basically be getting the car before you've made the first repayment amount for your loan.

This is great if you want to get on the road as fast as possible and spread the cost of your car. However, you’ll find that a no-deposit car finance deal will be more expensive than if you had put down a deposit. These types of loans mean that you will need to borrow more in total, as you haven't reduced the loan with a deposit. 

Can Anyone Get a No Down Payment Car Loan? 

Not everyone can get a car finance deal without putting down a deposit. In fact, you’ll need a pretty good credit score and a strong borrowing history that shows you've made payments on time consistently. That's because lenders will consider that loaning you money without a deposit is riskier than if you had put a bit of money down. They will want to be assured that you are reliable. That's also why you'll most likely get higher interest rates because this risk will have to be reflected in the overall cost of the loan without a deposit. 

You can also expect lenders to make you go through affordability tests that range from being quick and easy, to so long and annoying. You will have to demonstrate that you earn enough income to comfortably afford your monthly payments and meet the affordability criteria for zero-deposit car finance.

The Pros of Zero Down Payment Car Finance

• You won't need to pay thousands of pounds in one go up front to buy a new car 
• You'll be able to spread out the cost of buying your next car and it will feel like less of a financial burden. Please be aware though that car finance sometimes gets people into high amounts of debt so please borrow responsibly. 
• You’ll be able to hop behind the wheel of your new ride without having to make any payments for the first 30 days which can give you some time to get your finances sorted.

The Cons of Zero Down Payment Car Finance

• Zero down payment car finance involves higher monthly payments and therefore significantly higher overall costs
• These loans are also usually more often available with personal contract purchase arrangements which means you won’t really own the car until you've paid it all off and you'll have to pay a balloon payment if you want it to be officially yours.
• People who get car finance with zero deposits are much more likely to be in negative equity, which means that ultimately they have to pay more out of their own pocket if they want to sell their car/buy a new one, once it's paid off. It kind of defeats the purpose of not putting down a deposit if it means you have to find a considerable sum at the end of your loan term. 
• You'll also find that car finance with zero deposit will only be available to you if you've got a really good credit score and you have to earn a certain level of income to pass the strict affordability tests. 

What Car Can You Buy? 

You can effectively buy most types of cars with no deposit car finance and from lots of different providers. Plenty of manufacturers advertise no-deposit deals on brand-new cars as a sales tactic. Be careful though because they often try to sell you a ridiculous amount of extras in exchange for the no deposit, which ends up costing you more than if you actually put down a deposit. We don't recommend going for those types of deals because you can easily get scammed. You can also put zero down on used car loans, subject to the age of the car. 

Takeaway

No deposit car finance sounds like heaven. But actually, it entails much more than meets the eye. Bear in mind that not putting down a deposit is a surefire way to get higher monthly payments. That's because you'll be borrowing more money, probably for longer, which grows the amount of Interest you have to pay. However, if this works better with your personal cash flow situation, it could allow you to get your dream car much sooner, which is amazing. The most important thing to remember is to read every word of your car finance agreement and make sure you understand what is in play. 

Need more car finance help? Check out the Carmoola blog! We’re car loan experts and create daily guides to help you navigate the sometimes tricky world of car finance. We also offer zero deposit car finance - subject to status.  Why not get in touch and see if you are eligible - or simply click the pink button to download Carmoola and find out for yourself! 🚙😉