Do I Need a Car Loan Deposit if I Have Good Credit?
Everything you need to know about no deposit car loans
You're looking for a car loan, but you don't want to use your savings towards the deposit. That's okay, there are options for getting a car loan with no deposit so you can keep your savings safe.
We'll discuss when you should consider putting a deposit towards your car loan, and when you can get a car loan without a deposit. Keep reading to find out what you should do when you buy your next car.
What is a no deposit car loan?
A no deposit car loan is a secured car loan for the full purchase price of the car you buy. Remember, even when you pay no deposit towards the car, you'll still need to cover the registration costs and comprehensive car insurance.
When can I get a no deposit car loan?
You can get a car loan without a deposit when you've got a steady income, a stable credit history, and no money outstanding on your current car.
When you buy a new car, you'll be more likely to qualify for a car loan without a deposit than if you buy an older car. Each lender has strict guidelines about the loan to value ratio that they will allow.
What is the Loan to Value Ratio?
Your maximum loan to value ratio is the maximum percentage of the car's value that the lender will allow you to borrow.
LVR compares the loan amount to the book value of your new car.
As a guide, if you have a low LVR when you sell the car, you will have money in your pocket after paying out your car loan.
If you buy a new car, it's more likely that you will be able to borrow the full purchase price of the vehicle. When you buy an older car in good condition, or with modifications, you're more likely to need a deposit to purchase, as the sale price can be higher than the book value.
Each lender has different guidelines, so if you're looking to buy your car without a deposit, speak with a Positive lending expert to find out which lenders will offer a high LVR no deposit car loan.
No deposit car loan checklist
- Good credit history
- Evidence of regular income
- Car value matches book value
- Income surplus available to meet loan repayments
- Apply to lender with high LVR loan option
If you can say 'yes' to each item on this checklist, it might be time to get your no deposit car loan quote, just like Mark has here:
| Case Study: High LVR No Deposit Car Loan |
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Mark is looking to buy a new car. He's currently renting and has $3,000 in his emergency savings fund. He applies for a Positive No Deposit Car Loan, and is matched to a lender who will lend up to 150% LVR. Mark decides to buy a brand new Mazda 6 and include his comprehensive car insurance, bringing his weekly car payments up to $182 per week. Mark's happy that he can afford the Mazda 6 payments, and pleased that he can keep his emergency savings in the bank just in case. |
When will I need a car loan deposit?
Unfortunately, you can't always get a car loan without a deposit. You'll need a deposit when:
- Buying an older car, especially if it has modifications or extra features
- Your credit score isn't high
- You want to lower your car loan repayments
- You want the shortest loan term possible
Why is a deposit good?
Benefits of a paying a car loan deposit include access to a lower interest rate, lower monthly payments, and a lower overall cost of borrowing.
Putting a deposit towards your car purchase may also mean you can take out a shorter loan term, and be free of repayments much sooner.
Applying for a no deposit car loan
When you apply for a loan, it pays to weigh up the pros and cons of putting a deposit towards your car. The checklist above can help you find out if you are eligible for a car loan without a deposit.
Once you're ready to apply for a no deposit car loan, your Positive consultant will be able to help you compare your options and make the best decision for your next car loan.
Tom Caesar is the Managing Director of The Positive Group, a group of Australian financial services companies offering a broad range of finance to clients Australia wide. The Positive Group assist clients in the areas of car finance, mortgages, insurance & wealth management. Tom has been in car & asset finance for over 10 years. Tom regularly contributes articles on car finance, insurance, technology and business growth, drawing on his experience of starting his own brokerage in 2009.