No-deposit car finance: how it works and who can get it

Want to buy a car without putting down a deposit? Find out if you're eligible in our jargon-free car finance guide.



When exploring car finance, you'll see that most agreements are split into three phases.

First, you put your deposit down. Next, you pay off the money you're lent in fixed monthly instalments. Finally, the agreement ends and, depending on the type of car finance, you either take ownership of the car or return it to the dealer.

If you're strapped for cash, you might well wonder whether you can skip the first phase and move straight to monthly repayments.

The answer is yes – in many cases, at least.

How it works is simple. Instead of putting down cash on day one, you borrow the full value of the car. That cost is then spread across fixed monthly instalments (with interest).

No-deposit car finance is a popular choice for buyers at different ends of the financial spectrum – from people with strong financial profiles to people with defaults, CCJs (county court judgments) and poor credit histories.

Here at Zoomo, we provide low-deposit and no-deposit car finance in Newcastle. But before we fill you in on our offerings, let's take a closer look at how it works and who's eligible.

How does no-deposit car finance work?

With standard car finance, you pay an initial deposit for a car and drive it away soon after. You then cover the remaining cost (plus interest) with fixed monthly instalments.

The difference with no-deposit car finance is simple: you skip the initial deposit and move straight to repayments.

Like other car finance agreements, no-deposit car finance can be used to buy both new and used cars.

Who can get no-deposit car finance?

To get no-deposit car finance, you must pass the lender's credit and affordability checks. Whether you're eligible will depend largely on your credit history and proof of your disposable income.

What lenders want is to know that you can comfortably make the repayments. Aside from this, there are very few constraints on who can get car finance.



Who needs no-deposit car finance?

People who apply for no-deposit car finance tend to fall into one of two categories.

First, there are buyers with good or excellent credit. Mainstream lenders will often offer no-deposit or 0% APR deals to these buyers, reassured by their strong financial profiles.

If this doesn't sound like you, you needn't be put off. Specialist bad-credit lenders like Zoomo also offer no-deposit car finance to people with defaults, CCJs or poor credit histories.

Whatever your circumstances, you should consider your options before applying for no-deposit car finance. To help you decide, let's weigh up the advantages and disadvantages.

What are the advantages of no-deposit car finance?

There are three main advantages of taking out a no-deposit car finance agreement.

1. 🚙 You don't have to pay any upfront costs. You can drive away from the dealership with your savings intact.
2. 💷 By making monthly payments but no upfront payment, you can have better cash flow (depending, of course, on your unique financial circumstances).
3. 🔧 If you have a poor credit score, a no-deposit car finance agreement can help you build or repair it. However, that depends on you making the repayments in full and on time.
   
   

What are the disadvantages of no-deposit car finance?

Now for the disadvantages. Here are three reasons why no-deposit car finance might not meet your needs:

1. 🪪 Your monthly repayments will be higher than if you pay a deposit. That's because you're borrowing 100% of the car's value.
2. 📈 Because the loan balance is larger, you'll end up accumulating more interest over the term of the agreement.
3. ✋ Lenders tend to be stricter in their eligibility requirements than when the agreement starts with a deposit.
   
   

Let's zoom in on that last point.

Lenders tend to be stricter with no-deposit car finance because these agreements are riskier from their point of view. To protect themselves, they'll take a closer look at your credit history, income and affordability.

As we say, however, a poor credit history isn't necessarily a barrier to getting a no-deposit car finance agreement.



What are the most popular car finance options in the UK?

The two most popular car finance options in the UK – with or without a deposit – are personal contract purchase (PCP) and hire purchase (HP) agreements.

In a PCP agreement, your monthly payments cover the car's depreciation (loss of value) and the interest. At the end of the agreement, you hand back the car or pay a large final balloon payment to own it outright.

A hire purchase agreement works similarly. The main difference is that when the term ends, and the final payment is made, you automatically own the car – no balloon payment required.

These two kinds of car finance agreements are offered by a wide range of lenders and dealers in the UK.

Most of the time, they begin with an upfront deposit, typically starting at 10%. The higher the deposit, the lower the repayments. In some cases, however, you can skip the deposit and start your repayment scheme right away.

How we can help

Here at Zoomo in Newcastle, we offer no-deposit car finance deals, specialising in car financing for people with poor credit histories.

If you can put down a deposit, your overall monthly payments will be lower. But if you can't, you can still drive away from the dealership in your new or used car. 

We boast a whopping 96% acceptance rate – and we work with specialist lenders that are happy to lend to people with less-than-perfect credit records.

Most of the time you can get approval within an hour. Speed, efficiency and careful consideration of your current affordability, not just credit history – that's the Zoomo promise.

So, if you're looking for no-deposit or low-deposit car finance, why not apply online today? It takes less than two minutes and uses soft-search technology, so it won't affect your credit score until you formally apply.