Can I Buy a Used Car with No Down Payment?

There are a number of different car finance options available, from hire purchase (HP) to personal contract purchase (PCP) and personal contract hire (PCH). The most common way to secure car financing without a down payment is via PCP, but it will depend on the provider of your car finance.

This article will look at ways to secure no-deposit car finance, what you can expect from such a deal, and any potential workarounds.

Can you buy a used car with no down payment?

There are ways to secure car finance with no deposit (or ‘down payment’). Whether or not this is available for you will depend on what kind of car finance you’re looking for. Similarly, whether no-deposit finance is most appropriate for you will depend on your personal circumstances.

When you purchase a used car, you’re buying a vehicle that’s value has already depreciated. Any deposit that you need to pay on it will therefore be smaller than it would be where you purchase a new car.

If you opt for no-deposit finance, then you can expect to pay the same amount of money by the end of your car finance terms as you would if you were to make a down payment. That said, the lower your deposit is, the higher your monthly repayments will be. In short, no-deposit finance will end up with you paying higher monthly repayments, which you need to be sure that you can make before entering into the finance deal.

You can also expect to be paying a higher rate of interest if you do not put down a deposit. As a result, you can end up repaying more than what the car was originally worth just through this hike in interest.

It’s also worth bearing in mind that if you are looking for no-deposit finance, your lender will likely only accept you if you have a high credit score. Because you aren’t fronting the money for a down payment, you’re considered higher risk. As such, your credit score will need to demonstrate that you have a track record of making your repayments in a timely and efficient manner. You’ll also likely have to pass affordability tests, which car finance providers conduct in order to ascertain whether or not a borrower is financially able to make their repayments.

As such, whilst it is possible to secure a used car with no down payment, if you can front the money for that deposit when you initially purchase the vehicle, this will lower both your monthly repayments and your interest costs. It can therefore be more beneficial for you in the long run.

Alternative ways to finance your car

There are things that you can do to try and finance your vehicle.

If you can shop around, this will put you in a better place to negotiate. Familiarise yourself with the kinds of terms that you can expect, so that you’re in the most informed position you can be. Similarly, if you shop around for a cheaper car, you won’t need as much for a deposit.

You could also consider asking someone to co-sign your loan. You and the co-signer would need to be aware of the potential risks in entering this agreement, but this might be a way to secure car finance without a down payment.

Alternatively, you could delay the purchase of the car until you have the cash to make the down payment. Any deposit is better than no deposit, and you’ll have likely improved your credit score over that saving period too, which will make you a more attractive candidate for finance in the first instance.

Find out more about used car finance

If you have questions about no-deposit car finance, or want to find out what other deals may be available, you can contact My Car Credit today, or use our car finance calculator to check what kind of terms you can expect.