Car leasing with no deposit

Low monthly payments with nothing to pay upfront? Take your pick between zero deposit PCP finance and car leasing deals

BuyaCar team
Jan 19, 2022

If you're looking for the lowest monthly payments on a brand new car, then leasing could be the answer. Car leasing essentially works like a long-term rental agreement and generally features lower monthly payments than other finance options. You make a payment upfront, followed by a series of monthly payments. At the end of the contract, you hand the car back and walk away.

Lease contracts often require you to make an initial payment before the car is delivered. This is typically presented as a number of monthly payments - some deals require the equivalent of nine monthly payments upfront, while others may only require the equivalent of one - so you may not need to find a large amount to pay upfront. Generally, the more you pay upfront, though, the less you'll pay each month.

There is another way to get a car with an affordable monthly payment and no deposit, however. Personal Contract Purchase (PCP) finance offers similarly low monthly payments, while giving you the option to buy the car at the end of the contract. It's also available on used cars - something that isn't normally the case with leasing - which means you should be able to get even lower monthly payments with PCP.

We don't offer leasing with no deposit here at BuyaCar but we do have are a number of lease deals with only one or two months' worth of upfront payment needed that could fit the bill. Alternatively, you can take advantage of a no-deposit PCP finance deal that provides you with low monthly payments and some added flexibility at the end of the contract.

Unlike leasing, you can also use PCP finance for used car purchases, so it may be worth checking out if you fancy the lowest possible monthly payments on your next car. Click on the button below to see just how much you can get for your monthly budget with BuyaCar. When you find a car you like, click on the car and head to the finance calculator on the car page, where you can set a contract length, deposit amount and mileage allowance to see how much your monthly payments could be.

No deposit lease-type finance - PCP finance

As is the case with leasing, monthly payments on a PCP finance contract are low because they only cover part of the car's cost - in this case the value that the car is expected to lose over the course of the contract, also known as depreciation. In other words, your deposit - should you pay one - and your monthly payments don't cover the whole value of the car.

At the end of a PCP contract, you can return the car with nothing more to pay, provided that you've stuck to the pre-agreed mileage allowance and kept the car in good condition - just like leasing. However, with PCP there's also the option to make the optional final payment to buy the car outright. Despite this, many drivers choose to hand the car back and get another vehicle.

Unlike leasing, PCP finance is available on new and used cars and, depending on your credit rating, you may be eligible for no-deposit finance. With PCP finance it can also be easier to hand the car back part-way through your contract than with a lease, either by settling the remaining finance balance - paying the difference between the outstanding finance balance and the current value of the car - or by using a right called 'Voluntary Termination'.

To use Voluntary Termination you will need to have paid at least half of the total amount payable - that's the deposit, monthly payments and optional final payment, combined - which normally only happens towards the very end of the contract. It still offers an additional layer of protection if your circumstances change and you are no longer able to afford the car or it's no longer suitable for you.

Car leasing with no deposit - what’s the catch?

With no deposit to pay, you’ll have at least a month to save before your monthly payments begin, and there’s no need to raid any of your savings to pay the initial deposit. However, if you put no deposit down your monthly payments will be higher than if you had paid something upfront.

With PCH leasing that means you're tied into a contract with higher monthly payments than if you paid a deposit, and if your circumstances change it can be difficult and costly to end the contract early. Meanwhile, if you opt for PCP finance, putting down no deposit means you'll also pay more in interest because you're borrowing the full value of the car - the larger your deposit, the less interest you'll pay.

In the case of PCP, you’ll also be in negative equity for longer (where the outstanding debt is greater than the current value of the car), which could be an issue if you need to end the contract relatively early on. Negative equity happens when you owe more than the car is worth - which is typically the case until you reach the end of a PCP finance contract.

In some cases, you may be in negative equity until the end of the contract. It’s only a problem if you want to return the car early - as you’ll need to pay the difference between the remaining finance balance and the car's current value - or if the vehicle is written off, as the insurance pay-out may only cover the car's current value before it was written off, which could be less than the remaining finance balance. In that situation, Gap insurance can cover this risk.

Fear not, however, if the car is still in negative equity at the end of the contract and you want to hand it back. Provided you've kept the car in good condition and have stayed below the pre-agreed mileage limit, there should be nothing extra to pay - you can simply hand the keys back and the finance company takes the hit - not you.

Meanwhile, if you know you're in negative equity and are still quite early on in the contract but need to change car, you do still have a number of options. Check out our guide to negative equity car finance to see which works best for you.

*Representative PCP finance - Ford Fiesta:

48 monthly payments of £192
Deposit: £0
Mileage limit: 8,000 per year
Optional final payment to buy car: £2,923
Total amount payable to buy car: £11,926
Total cost of credit: £2,426
Amount borrowed: £9,500
APR: 9.9%

BuyaCar is a credit broker, not a lender. Our rates start from 6.9% APR. The rate you are offered will depend on your individual circumstances.


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