Whether you love the affordability of personal contract purchase (PCP) or prefer the easy path-to-ownership of hire purchase (HP), many car finance agreements have the option to pay a deposit. Keep reading to discover how car deposits work, what you should consider when making one, and how they can influence your overall finance deal.

What is a car deposit?

A car deposit is the lump sum of cash you pay upfront when buying a car. It shows the seller that you’re serious about the purchase and secures the car until the full payment is complete or financing is finalised. Your deposit often influences the terms and conditions of your deal, affecting everything from monthly repayments to interest rates.

Purpose of a car deposit

Here’s a closer look at why deposits are so important when financing cars:

Securing the vehicle

A deposit ensures that the dealer holds the car for you and doesn’t sell it to another buyer. This is particularly important for popular models from manufacturers like Land Rover, Nissan and Mercedes-Benz, which can have long lead times. Deposits can also be a lifeline when you want to secure a car but need time to arrange financing.

Lower monthly payments

Deposits help offset the total purchase price of the vehicle, which lowers your monthly payments. Generally, the higher the deposit, the lower your monthly finance payments. This is because you’re reducing the principal amount that needs to be financed.

Improved finance terms

A decent deposit can affect the terms of your finance agreement and help unlock a lower interest rate. Lenders associate high deposits with low-risk borrowers, which can prompt them to offer more favourable loan conditions.

How much should you pay?

The amount you decide to put down as a deposit depends on several factors:

Price of the car: Higher-priced vehicles usually require a larger deposit. A common benchmark in the UK is 10-20% of the car’s total cost. For example, if you’re purchasing a car priced at £25,000, expect to pay a deposit of £2,500 to £5,000.

Dealer requirements: Some dealerships have set minimum deposit requirements.

Your budget: How much you can afford to pay upfront will often determine your deposit size. It’s important not to stretch your finances too thin by putting down more than you can comfortably afford.

Different types of deposits

Standard deposits: Many car financing deals start with a standard cash deposit.

Part exchange: If you’re trading in your old car, its value can sometimes be used as your deposit for the new one. This can be a convenient way to boost your deposit without additional cash.

No deposit deals: Some lenders offer ‘no deposit’ terms which allow you to skip an upfront payment entirely.

Find the right deal with My Car Credit

Whether you’re struggling to pull together a decent deposit or you’re ready to make a sizeable down payment on your next car, My Car Credit is here to help. As a car finance broker, we work with a panel of trusted lenders to find deals that suit every type of driver.

To get started, take a look at our handy online car finance calculator and get that dream of a new car underway.

Rates from 9.9% APR. Representative APR 12.4%

Evolution Funding Ltd T/A My Car Credit

My Credit Rating

Excellent

  • You are a home owner
  • You have been on the electoral role for a long period of time
  • You have current credit arrangements and mortgage with no defaults
  • You have no CCJs, credit arrears or missed payments
  • You rarely apply for credit
  • You are employed or self-employed

Good

  • You are on the electoral role
  • You are a home owner or long standing tenant
  • You have a stable employment history
  • You have current credit arrangements with occasional missed payments
  • You have no CCJs

Fair

  • You are or have recently been on the electoral role
  • You may have recently changed address
  • You may have occasional missed payments
  • You may have an old CCJ
  • You may have regularly applied for credit

Poor

  • You may have had frequent changes in address
  • You may not be traceable on the voters roll
  • You may have exceeded credit card limits
  • You may have missed payments on current agreements
  • You may have had a CCJ in the past

Bad

  • You may not be traceable on the voters roll
  • Your credit cards are over their limits
  • You have recent CCJs
  • You may have been refused credit elsewhere
  • You may be in a debt management plan
£

X monthly repayments of
£X

Typical rate

Loan amount

Total payable

X% APR*

£X

£X

*for illustration purposes only

No impact on your credit score*

Representative Example

Borrowing £7,500 at a representative APR of 12.4%, annual interest rate (fixed) 12.36%, 47 monthly payments of £196.44 followed by 1 payment of £206.44 (incl. estimated £10 option to purchase fee), a deposit of £0.00, total cost of credit is £1,939.12, total amount payable is £9,439.12.

Evolution Funding Limited, trading as My Car Credit, is a credit broker and not a lender.

Please ensure you can afford the repayments for the duration of the loan before entering into a credit agreement.

*Initial application is a soft search. Should you progress, some lenders may perform a hard search on your credit file.

Require more help?

Got a question you can’t find the answer to, or need some advice and guidance around taking out car finance? Our Car Credit Specialists are friendly, experienced, and here to help so get in touch today!