A deposit is an initial payment given as a guarantee to secure a purchase in advance and remove it from public sale, with the intent of the balance being paid at a later stage. The best way to pay a deposit, if it's practical to do so, is by credit card, as then you will be covered by the Consumer Credit Act should something go wrong. If you decide to cancel or pull out of the deal, the seller is entitled to keep your deposit; however, depending on the reasons for your cancellation, there may be room for negotiation.

Why do I need a deposit?

A deposit reduces the total amount of the loan, resulting in lower monthly repayments. When a deposit is paid, it will strengthen the deal, and in some circumstances, it could be the difference between an application for car finance getting accepted or declined.

When is a deposit required?

At Creditplus the rules around paying a deposit vary depending on how you chose to finance your car. If we source and supply your vehicle, we charge a minimum deposit of £300. This is used to secure the vehicle and demonstrates a commitment to the loan, both on the part of Creditplus and the customer. Under some circumstances, this deposit can be refunded if there is an issue with the vehicle or loan. In these cases, it would need to be agreed by our Logistics Manager.

If you are only applying for finance and intend to source the vehicle yourself, we may not require a deposit, especially if you have an Excellent credit score. However, if you have a Fair or Poor credit score, providing a deposit can strengthen your car finance application. We always recommend that a customer pays a deposit, simply because it reduces monthly payments and helps secure your finance agreement.

If you have an Excellent credit score and wish to take out a Personal Contract Purchase (PCP) agreement you'll usually be required to provide a deposit of 10% of the sale price of the car.

Zero deposit car finance

For those with a very good or excellent credit rating, zero deposit car finance (also known as "no deposit car finance") is an option which means you do not have to pay a deposit at the start of your finance agreement. The finance package will fund the entire cost of the vehicle.

Zero deposit car finance is mainly available to those with a clean credit history, as lenders will require more security from customers with a poor credit history or credit rating. In some cases it is available to those with a fair or poor credit rating, however the finance package is likely to be far more expensive than normal.

For those with a fair to poor credit rating, a deposit will help you obtain car finance at more favourable terms. It will also reduce the amount you have to borrow and the amount of interest you pay over the course of the agreement.

Pros and cons of zero deposit car finance

The main advantage of zero deposit car finance is that you do not have to pay anything up front. This can be appealing to those with limited savings who want to take advantage of a car finance package.

The problem is that for many customers, zero deposit car finance will not be available. Because it is mostly available for customers with a strong credit rating, it will be difficult to be accepted for a no deposit agreement if you have a weaker credit history. Zero deposit car finance agreements can also be more expensive, so you will end up paying more in the long run.

The big advantage of paying a deposit is not just that it secures your agreement, but it also reduces your monthly payments. A large deposit can make your monthly payments much more manageable. If you don’t have a lump sum to use as a deposit, you can part exchange an old car and use that as a deposit on your car finance agreement. Speak to your Customer Advisor for more information.

It may also seem like an advantage that you would not lose any money should you decide to cancel the deal. However, all FCA regulated companies provide a 14-day money back guarantee on all finance packages they provide

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