One key factor to consider is how much deposit you should save. This decision will affect the amount you borrow, the interest rates, and the overall cost of your loan. Fortunately, we're here to help. In this guide, we'll show you exactly how much deposit you should aim for and provide tips on how to save effectively.
What do the experts recommend?
Experts in car finance generally recommend a 10% deposit when purchasing a new or used car. So, if you're buying a £10,000 car, you should aim for a deposit of around £1,000.
However, if you have the means, putting down a larger deposit can offer several advantages. For one, borrowing less money can result in lower interest rates, potentially saving you money in the long run. It can also make it easier to secure car finance, even if you have bad credit.
While a larger deposit has its benefits, it's important not to drain your savings completely. You'll still want to have an emergency fund for any car-related expenses. Additionally, a smaller deposit puts you at risk of negative equity, where you owe more on the car than it's worth. Lastly, keep in mind that certain financing options, such as personal contract purchase (PCP) agreements, may have restrictions on large deposits.
How can I save for a deposit?
Don't worry if you're concerned about saving up for a deposit. There are plenty of strategies you can employ, even if you're on a tight budget. Start by setting a clear savings goal and creating a budget plan specifically for your car deposit. This will help you track your progress and stay on target. Consider opening a dedicated savings account just for your deposit.
Also, look for areas where you can cut back on expenses, such as eating out or subscription services, and allocate those funds towards your savings plan.
Can I get a car on finance without a deposit?
A common question that arises is whether it's possible to get a car loan without a deposit. The answer is yes, zero deposit car loans are available. However, these loans often come with higher monthly payments or longer loan terms.
Keep in mind that not everyone will qualify for no deposit car finance, so it's best to check with your lender or finance broker to determine your eligibility.
Ultimately, the appropriate deposit amount for a used car will depend on your individual circumstances, budget, and preferences. However, a 10% deposit is generally recommended and offers numerous advantages. Remember to avoid depleting your savings entirely to make a deposit and keep an emergency fund for any unexpected car costs.
Saving for a deposit is achievable, and with some adjustments to your expenses, you can make progress towards your goal. Lastly, while zero deposit car loans exist, they may not be suitable for everyone, so it's important to discuss your options with your lender or finance broker. Armed with this knowledge, you'll be well-equipped to purchase a reliable used car that fits your needs and budget.