Can I Get Car Finance Without a Deposit in 2025?

Zero-Deposit Car Finance: An Evolving Option for UK Buyers

Securing a car without an upfront deposit is increasingly possible in 2025. As cost-of-living pressures persist, consumers are searching for flexible finance solutions. But what does zero-deposit car finance mean, and how can you access it responsibly?

Who Should Consider No-Deposit Car Finance?

If you’re eager to replace or upgrade your vehicle but lack savings for an initial payment, zero-deposit finance may appeal. It’s particularly relevant for first-time buyers, those with limited cash flow, or anyone needing to preserve funds for other expenses.

Key Concepts and Terminology

Car Finance: A method of spreading the cost of a vehicle over time, typically via monthly payments.

Deposit: An upfront lump sum paid to reduce the amount borrowed and lower monthly payments. Traditionally, this is 10% of the car’s value.

Zero-Deposit Finance: Finance agreements that do not require an initial payment. The total amount borrowed is higher, as no upfront reduction is made.

APR (Annual Percentage Rate): The total cost of borrowing, including interest and fees, expressed as a yearly rate.

HP (Hire Purchase): You hire the car and own it after the final payment.

PCP (Personal Contract Purchase): Lower monthly payments, but a large final ‘balloon’ payment is needed to own the car.

Understanding these terms is essential. Zero-deposit deals increase the amount borrowed, which can mean higher monthly payments or longer terms.

Exploring Your Options

Several mainstream lenders and brokers, including Kandoo, now offer no-deposit deals on both new and used vehicles. Your options typically include:

• Hire Purchase (HP) with No Deposit: Monthly payments cover the full cost, and ownership transfers after the final payment.

• Personal Contract Purchase (PCP) with No Deposit: Lower monthly payments, with a choice to pay a final lump sum to own the car or return it.

• Personal Loans: Some lenders offer unsecured loans for car purchases with no deposit required, though interest rates can be higher.

It’s worth noting that dealers may offer incentives for zero-deposit finance, but always compare the total cost—including interest rates and any hidden fees.

Costs, Impact, and Risks

Opting for zero-deposit finance means borrowing the full value of your car. This has several effects:

• Higher Monthly Payments: With no deposit, the amount to be repaid is larger.

• Increased Total Interest: You pay interest on the full amount, which can significantly increase the total cost of the car.

• Negative Equity Risk: You may owe more than the car’s value, especially early in the term.

Always review the APR and total payable before signing. A seemingly low monthly payment can mask a higher overall cost.

Eligibility, Requirements, and Conditions

Lenders assess applications based on:

• Credit Score: Strong credit is often required for zero-deposit deals.

• Employment Status: Proof of stable income is vital.

• Affordability Checks: Lenders will assess your ability to manage repayments.

• Age and Residency: Most lenders require applicants to be UK residents aged 18 or over.

Providing accurate information and supporting documents speeds up the process and improves chances of approval.

How Zero-Deposit Car Finance Works: Step-by-Step

1. Choose your car and finance type (HP, PCP, or loan)

2. Compare zero-deposit offers from lenders or brokers

3. Submit your finance application with supporting documents

4. Complete credit and affordability assessments

5. Receive finance approval and review terms

6. Sign the finance agreement

7. Collect your new vehicle

8. Make regular monthly payments as agreed

Pros and Cons of No-Deposit Car Finance

Pros:

• No need for upfront cash

• Faster access to a new or used car

• Can help spread costs over time

Cons:

• Higher monthly payments and total interest

• Stricter eligibility requirements

• Increased risk of negative equity

Weigh these factors carefully before committing.

Things to Watch Out For

Zero-deposit finance can be tempting but carries important considerations. Ensure you:

• Scrutinise the total repayable amount, not just the monthly cost

• Watch for hidden fees or penalty charges

• Understand the implications for your credit if you miss payments

• Avoid overstretching your budget—future financial pressures could make repayments difficult

If you’re uncertain, seek impartial advice before proceeding.

Alternatives to Zero-Deposit Finance

If you’re hesitant about no-deposit deals, consider:

• Saving for a Small Deposit: Even £500–£1,000 can reduce costs and expand options

• Leasing: Fixed monthly payments with no ownership, which sometimes require smaller upfront costs

• Guarantor Loans: A guarantor can help if your credit is less than perfect, though this carries risks for the guarantor

• Buying Outright: Using savings or lower-cost loans can eliminate interest altogether

Compare all options to find what suits your financial circumstances best.

Frequently Asked Questions

Can I get zero-deposit car finance with bad credit? It’s challenging, but some specialist lenders may consider your application. Expect higher rates and stricter terms.

Does zero-deposit finance apply to both new and used cars? Yes, though availability may vary between dealers and lenders.

Will I own the car at the end? With HP, yes. With PCP, you must pay the final balloon payment to own the car.

Are interest rates higher on zero-deposit deals? They can be, as the lender is exposed to more risk.

Can I pay a deposit later if my circumstances change? Some agreements allow part-payments, but check with your lender first.

What happens if I want to settle early? You can usually pay off the balance early, but check for any early settlement fees.

Taking the Next Step

Before committing, research offers from multiple lenders, review the total repayable cost, and ensure repayments fit your budget. Consider speaking to a finance broker like Kandoo for tailored advice and access to a wider range of products.

Disclaimer

This article provides general information only and is not financial advice. Always read the terms and conditions of any finance agreement carefully and consider seeking independent financial advice before making significant commitments.