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Deposit on car finance - how much should I pay?

Choosing how much to put down as a deposit for your next car finance deal can be quite confusing

Car finance

Some people may say a larger deposit is better, others may recommend less – the right option for you is dependent on your individual situation.

How much deposit do I need to pay for car finance?

Some lenders may not request a deposit for car finance, but it depends on whether you meet their eligibility criteria.

Paying a higher deposit will result in cheaper monthly payments, essentially making your car more affordable in the long run.

It will obviously vary from person to person, but the more you can pay upfront, the lower your monthly payments will be for the rest of your finance deal.

It will also usually mean you’d pay less interest as you are borrowing less.

What’s the maximum I can put down as a car finance deposit?

Different lenders have different lending policies, so it’s always advisable to check with your preferred lender to see if they have any maximum deposit guidelines.

Do I have to pay a deposit on my car finance deal?

You don’t have to put down a deposit, and there are PCP deals out there that don’t require one, but these tend to be reserved for those with excellent credit scores.

This is because these PCP finance deals require you to borrow a lot of money, and lenders need to know you can pay it all back.

Can I use my current car as a deposit on a new one?

Many dealers offer a part-exchange scheme in which you can trade in your old car for another one – cinch included.

Large deposit vs smaller deposit

The decision of how much of a deposit to make is all yours.

Benefits of a large deposit for car finance:

The main reason you might opt for a larger deposit is because you’ll be borrowing less money – this usually means you’ll have to pay less interest, be able to finance over a shorter term, or benefit from lower monthly payments.

Drawbacks of a large deposit for car finance:

You may not want to put down a large deposit because you simply don’t have the cash. Putting down 10% of a car’s value can be difficult enough, let alone 30%.

Paying less of a deposit also means you have more cash free for other things in life.

Benefits of a smaller deposit for car finance:

The main benefit of putting down a smaller deposit is you will have more money to spend on other things outside of car ownership, and it also means you don’t need to scrape together thousands of pounds to spend all at once.

Drawbacks of a smaller deposit for car finance:

Putting down a smaller deposit means you’ll have to borrow more, which mean you’ll usually be paying more interest as the total cost of credit will be larger.

Learn more about car finance: