No deposit car leasing – the ultimate guide

    If you need to get a new car without having any savings available, no deposit car leasing could be the perfect solution.

    You’ll avoid a large initial payment and won’t pay any more over the term of the Personal Contract Hire (PCH) agreement than those who do.

    However, before you rush to sign up for a deal there are some essential details to consider, we’ve created this ultimate guide to no deposit car leasing to help.

    No Deposit Car Leasing - the ultimate guide
    A no deposit car lease can quickly get you into a new car

    With any personal car leasing, you’re hiring a car for a long-term period of time. Which means you don’t own the vehicle or get any cash back when it’s returned.

    Whether it’s referred to as 0 deposit leasing, zero initial payment, or no deposit, the option is less common than a normal PCH deal, so you might find your choice of providers and cars is more limited.

    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.

    No deposit car leasing explained:

    1. Who can get no deposit car leasing
    2. No deposit car leasing alternatives for bad credit scores
    3. Different types of no deposit car finance
    4. Where to find cheap no deposit car leasing deals?
    5. Used car leasing with no deposit?
    6. Car leasing with no deposit and free insurance
    7. Should you choose no deposit car leasing?

    Who can get no deposit car leasing?

    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.

    Your score will be a major factor in deciding whether you can get no deposit car leasing agreements. Most companies will insist that your credit score is good or excellent to consider letting you have a new car without an initial payment.

    This isn’t the only factor though, as you might also have to show a regular wage or income to cover the rental payments.

    No Deposit Car Leasing - Who can get it
    A good credit score makes it easier to get better deals, including with no deposit

    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.

    Whether you have a good or bad credit score, there are still options available for no deposit car leasing and finance worth exploring. The right solution will depend on your personal circumstances.

    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.

    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.

    It’s forbidden for someone else to take out a finance agreement on your behalf. But you can look at either applying for a joint application or include a guarantor on your agreement.

    Joint applications will include a partner, spouse, or family member who will be required to live at the same address. The leasing company will base their decision on the credit scores and incomes of both applicants.

    Guarantors are accepted by a smaller number of providers. In this case, a third party can agree to become liable if you start defaulting on your payments.

    In most cases, the person guaranteeing your contract will need to be a family member with good personal credit.

    Both joint applications and guarantors do have downsides. Everyone who signs will be responsible for the full length of the lease agreement, even if you separate from your partner or spouse during that period.

    Any missed or default payments will be recorded against you, and your partner or guarantor.

    No Deposit Car Leasing - alternatives
    Even with a bad credit score, there are options to get a car you really want

    One 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 car loan, it will have 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 finance, 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:

    Other options are available for no deposit car finance. Although this guide concentrates on PCH leasing, there are a range of no deposit Personal Contract Purchase (PCP) or Hire Purchase (HP) agreements available. Often these come directly from car manufacturers.

    As with leasing, you’ll need to pass credit and affordability checks, but with these finance options, you will have the option to buy the car outright with a final balloon payment (PCP), or you’ll be paying your way towards owning your car throughout the agreement (HP).

    No Deposit Car Leasing - no deposit finance
    You can even agree a no deposit car finance on a Porsche – but it won’t be cheap

    It will only be offered on specific models, but manufacturers offering no deposit PCP and HP deals include many of the top brands, so it’s well worth a Google search.

    So, why wouldn’t you take a no deposit car finance option where you can own your vehicle at the end of it?

    The main issue is the monthly cost. Low-interest rate Personal Contract Purchase deals will usually require a deposit, so you’ll be both borrowing more and paying more interest. Unless you meet the final payment, you won’t own the car at the end of the term.

    With Hire Purchase agreements, you are charged less interest and you’re paying towards the full price of the car over two and five years. Without paying an initial deposit your monthly fee will be substantially higher.

    The lowest price for any no-deposit car finance will generally be for car leasing, followed by PCP and then Hire Purchase. However, with the variations among lenders, particularly for anyone with a bad credit score, it’s worth checking out the total cost for each option thoroughly.

    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:

    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.

    No Deposit Car Leasing - used cars
    Nearly-new cars are often offered for no deposit car lease packages

    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.

    Car leasing with no deposit and free insurance

    Some personal car leasing companies will provide a package which includes insurance in the monthly payments. Combined with maintenance and servicing, this should cover almost every driving cost you will encounter aside from fuel.

    Drivers will need to be aged between 21-70 years of age, with a valid EU licence for at least two years.

    You are allowed no more than 6 points on your licence, no driving ban in the last 5 years and no more than 2 at fault accidents or claims made within the last 24 months.

    For a personal car lease, the insured drivers will need to either be the person taking out the lease, or their spouse or partner.

    The advantage is that pretty much everything is included, but it does mean you might miss out on savings by shopping for insurance separately.

    The insurance will also be limited to Third Party Liability cover which will protect you against claims from a third party in the event of an accident.

    But doesn’t help you with the cost of your own car or belongings, of it your car is stolen or destroyed.

    Currently, all car leasing packages with insurance included require a deposit to be paid. But with the growing popularity of no deposit car leasing, it may become an option in the near future.

    Should you choose no deposit car leasing?

    If you need quick access to a new or modern used car without having any savings, then a no deposit car lease can provide a simple and effective solution.

    If you’re happy with the contract and repayments, then it can be great whether you’ve got a good credit score, or even with a bad credit rating. And meeting the repayments will improve your credit history over time.

    But it’s worth checking out the options for no deposit car finance to check whether you can be better off with a PCP or HP deal that can leave you owning your own car.

    If you do prefer Personal Contract Hire, then it can be worth finding a deposit from somewhere to allow you to get a better deal which saves you money over the course of the agreement.

    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.