We all know that cars can be expensive. Aside from a house, it is probably the biggest purchase you’ll make in your life, especially if you buy a new motor. And while the vast majority of people opt for second-hand vehicles – 6,752,959 were sold in 2020 – it still means splashing out a significant chunk of change.
One way to make the costs lower is to put down a large deposit, even if you opt for car financing to make the monthly premiums more affordable. The truth is, though, that you don’t need a deposit to become the proud new owner of a car.
The main two types of car financing
By now, most people are familiar with the broad concept of car financing. After all, the vast majority of vehicle sales are leveraged with the help of hire purchase (HP) or personal contract purchase (PCP) deals.
Although the two forms of financing are similar, they do have their differences – and it’s essential to understand them before proceeding. For instance, HP is where you pay back the loan and own the vehicle at the end of the contract. PCP, on the other hand, involves having to return the car, finding a new PCP deal, or purchasing the car outright.
Both typically involve deposits, however, so how do you buy your dream motor if you don’t have a couple of grand lying around?
No deposit car finance
Even with the affordability of car finance, the deposit alone can price out many buyers. The good news is you can drive away without having to save up to 10% of the total amount. For people with small budgets, it’s an ideal compromise.
However, it’s worth pointing out the caveats that exist. Firstly, the monthly repayments are greater as there isn’t a deposit to reduce your premiums. That means you’ll pay more in the long term due to the interest rate. Still, it may be better for you to do this than wait for years to accumulate a deposit. Even then, the monthly fee may not be that much cheaper.
Fortunately, there are now plenty of car finance deals available – both HP and PCP – where a deposit is not necessary. Just bear in mind, with a PCP, a balloon payment will be needed to pay for the car outright. But, if you’re prepared, you can try and save up over the contract period while driving around in a fantastic vehicle.
How do you qualify?
Is it hard to get accepted for car finance? Well, not everyone is eligible to buy a car with no deposit as providers take certain features into consideration. Thankfully, My Car Credit has several tools you can use that highlight your probability of being accepted.
To learn about them, and to find answers to more of your questions, please contact us right away. We want to hear from you!
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