So you’ve seen the car of your dreams in the showroom and you are ready to take the plunge. In an ideal world you’ll tell the dealer that you are a cash buyer, and set about negotiating the best deal that you can possibly get.

But the most of us, don’t live in an ideal world and don’t have the wherewithal to buy a car outright for cash. Let’s be frank, most of us, will finance all or part of the purchase price.

There’s a myriad of finance options on the market, from Personal Loans to Personal Contract Plans (PCP), Hire Purchase, and Leasing.

Becoming more and more popular: No Deposit Car Finance

An increasingly popular option is known as No Deposit Car Finance. And as with all types of car finance there are Pros and Cons to the packages that are available on the market. Here we look and some of the advantages and disadvantages to this popular type of car finance.

Back in the day it was conventional wisdom that if you couldn’t afford the deposit for your car finance package, you couldn’t afford the finance.

If you couldn’t stump up the deposit, you probably wouldn’t be able to make the repayments or that was the logic.

However, with the advent of the Internet, buyer options have greatly increased and No Deposit Car Finance packages are now commonplace.

But these options aren’t right for everyone and if it’s the right option for you, will depend on your personal circumstances.

Main benefits of No Deposit Car Credit

One of the main benefits of this type of finance is that you don’t have to put down a deposit on the car that you are hoping to purchase, and this opens a world of possibilities for the buyer.

Traditionally lenders liked to see the buyer put down up to 20 per cent of the purchase price as a deposit and this could run to a considerable sum, depending on the cost of the car in question.

No Deposit Car Finance has advantages for buyers that have no problems meeting the monthly payments offered by the lender.

If you can comfortably afford the repayments, it might make sense to go this route for financial reasons.

It also means that you do not need to tie up a chunk of cash in the form of a deposit, that could be used elsewhere for other big ticket items.

Things to consider before signing a No Deposit Car Finance agreement

1 Generally, No Deposit Car finance packages are charged at a higher interest rate, simply because the lender is taking a bigger risk.

2 Consequently, it may end up costing considerably more to purchase the car, over the lifetime of the loan.

3 If you finance the full amount, your monthly payments are likely to be higher and this may mean that you end up paying considerably more over time.

4 The fact that you haven’t put down a deposit may mean that you are tied into a longer loan period, to make the monthly repayments more affordable.

5 This in turn could mean the residual value of the car might be less at the end of the loan period, than you might have expected, if the load period was shorter.

6 The increasing number of finance packages on the market is testament to the popularity of this type of loan.

7 It might not work for everyone, but there is an increasing cohort of people that are choosing this option.

It may not be for you but is worth of consideration the next time you are buying a car.

About the Author: John Loughran