No deposit car leasing – the ultimate guide
If you need a new car, but don’t have the savings for an upfront payment, no-deposit car leasing could be the perfect solution.
You’ll avoid a large initial payment, instead paying in monthly instalments to lease the car on a Personal Contract Hire (PCH) agreement.
However, before you rush to sign up for a deal there are some essential details to consider.
No deposit car leasing explained:
- What is no deposit car leasing
- Who can get no deposit car leasing
- No deposit car leasing alternatives for bad credit scores
- Different types of no deposit car finance
- Where to find cheap no deposit car leasing deals?
- Used car leasing with no deposit?
- Car leasing with no deposit and free insurance
- Should you choose no deposit car leasing?
What is no deposit car leasing?
Whether it’s referred to as 0 deposit leasing, zero initial payment, or no deposit, this refers to a personal car hire (PCH) agreement, AKA leasing a car, without paying upfront. This option is less common than a normal PCH deal, so you might find your choice of providers and cars is more limited.
Personal car leasing shouldn’t be confused with car financing. Leasing is always a hire, i.e., you don’t own the vehicle and aren’t due any of its value when you return it. You don’t have the right to sell on the car, either.
The main reason most car leasing companies ask for a large initial payment is that it mitigates the loss if there’s a problem with the monthly charges.
As a result, there are more restrictions on who is eligible to lease a car without paying a deposit. Your monthly payments will be higher than if you’d paid a bigger amount at the start.
Who can get no deposit car leasing?
In short, anybody with a good enough (according to the lender) credit score. This will likely translate as a credit score in the good-to-excellent brackets. You may also have to show proof of your regular wage or income.
Any long-term lease agreement will require you to undergo a soft credit check. This is required by the Financial Conduct Authority, so you should be wary of any company which offers a deal without this step.
If you have a bad credit score it will be much tougher to find a deal without a big initial payment. It’s not impossible, but your choice of providers and cars will be much more limited.
Missing any monthly payments will also further damage your credit rating, as well as incurring late payment fees.
With any Personal Contract Hire, missed payments will cause lenders to take back their car quickly to avoid any depreciation. Most will require you to pay off the full amount if you decide you need to end the agreement earlier than originally stated.
No deposit car leasing alternatives for bad credit scores
If you’re refused no deposit car leasing, or unhappy with the limited choice due to a bad credit score, there are other options you can consider:
1. The first step is to get a credit check service to review your credit history, identify any issues that can be fixed, and ensure your details are correct and up-to-date.
2. Although it’s forbidden for someone else to take out a finance agreement on your behalf, you can make a joint application or include a guarantor on your agreement.
Bear in mind that you can only make joint applications with a partner, spouse, or family member who lives at your address, and they’ll have to show their credit history.
Guarantors can be a third party who lives elsewhere, with good credit.
Anyone who signs up for leasing with you as a joint applicant or guarantor will be responsible for the full length of the lease agreement if you miss payments.
3. Another alternative if you have a bad credit score is a car loan. This means you could buy a vehicle outright, and when the loan is paid you would own the car outright, allowing you to potentially recoup money if you sell it.
The downside is that poor credit history limits your borrowing options. Although many companies will provide you with a loan, you’ll get higher interest rates.
Taking the Annual Percentage Rate (APR) into account will mean higher monthly costs, and can affect other borrowing. For example, with a good credit score, car loan APR rates can be around 2.8-3.5%.
However, lenders specialising in car loans for people with bad credit scores can use rates of 19-21%, or even more.
For example, borrowing £6,000 over 48 months at 3.8% would be a total of £6,468.96 (Or £134.77 per month). Changing that to 9.9% APR would increase it to £7,232.16 (or £150.67 per month). And if you signed up for a high 38.49% APR it would be £10,879.68 (£226.66 per month).
Improving your credit score is the most beneficial option, but it will take some time. Start by getting your credit history and checking any active credit, missed payments, and anyone who might be financially linked to you.
If you’ve entered into an Individual Voluntary Arrangement or a Debt Management Plan it’s still possible to apply for car leasing, but the payment rates will be higher than for anyone with good credit scores.
You should make sure your details are up-to-date and you’re registered on the electoral roll. If you discover an old joint account is with someone dragging down your score, you can issue a notice of disassociation which should get them removed.
For defaults recorded against you, it’s possible to add a ‘notice of correction’ which is a statement of up to 200 words allowing you to explain why it happened.
You can also still make an effort to pay off any previous defaults by contacting the lender in question to reduce or pay off the debt, even if it’s by a small amount per month.
To improve your credit score you need to pay debts in a timely fashion and try not to use more than 50-75% of your credit limit. Other factors which can improve your credit score include being a homeowner or included on a mortgage, using direct debit or a credit card, and having utility bills in your name.
Different types of no deposit car finance:
If you’re looking to actually own your car, but you don’t have the funds required for a deposit, you can look into Personal Contract Purchase (PCP) car finance agreements.
As with leasing, you’ll need to pass credit and affordability checks, but the benefit is that you’re paying towards eventual ownership.
Where to find cheap no deposit car leasing deals:
It’s possible to find low or no deposit car leasing deals listed on some of the comparison tools available online. Generally, after performing your search by make and model, you’ll then need to filter the results by specifying the initial payment, for instance ‘up to one month’ or by the lowest amounts.
Car leasing comparison tools with this feature include Parkers and Cars2Buy.
Otherwise, you’ll need to research individual suppliers yourself. When you’re looking at the various leasing companies, try and make sure you note what’s included in each offer to provide a like-for-like comparison.
For example, some companies may include additional features such as servicing in their offer, which will raise the monthly price but could save you money overall.
It’s worth taking your time, as you’re going to be tied into a deal for up to 5 years or more. And ending a PCH agreement early will usually require you to pay off the full amount.
To start your research, we’ve listed some of the UK car leasing companies offering no deposit deals:
- Intelligent Car Leasing
- First Vehicle Leasing
- Zero Deposit Car Leasing
- Green Apple Leasing
- National Vehicle Solutions
- Easy Lease Direct
- Synergy
It’s important that the company is a member of the British Vehicle Rental & Leasing Association (BVRLA), as it means they will have clear guidelines for fair wear and tear when you return your car, and the BVRLA will also be able to act as an intermediary if you have a dispute.
They should also be registered with the Financial Conduct Authority, and the Finance & Leasing Association also offer Specialist Automotive Finance training and testing to ensure a quality standard of knowledge for anyone offering car finance products.
Used car leasing with no deposit
By skipping the initial payment, you’re likely to get a higher monthly fee during your car lease. But one way to reduce the cost is to pick a used car.
Some car leasing companies will only offer use cars for no deposit offers.
The cars themselves will be ex-fleet or demo cars which will then go through an approved-used check process to ensure they’re in good condition. Some examples will still be under manufacturer warranty.
No deposit used car leasing options include:
The advantage of a no deposit used car lease is that it will lower your monthly payments. But you may face higher maintenance and servicing costs, particularly after the end of the manufacturer warranty.
Most leasing companies will offer to add a maintenance package for an extra monthly cost, which will cover scheduled servicing, replacements, and repairs for fair wear and tear, MOTs if required on cars older than three years, and breakdown cover.
You’ll need to either take this additional fee into account, or budget for paying your own costs as required.
Should you sell your car?
Want to learn more about the best ways to sell your car? Check out more of our guides here, covering everything you need to know about different finance schemes, and what they mean for you as a car owner.
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