If you are in the market for a new car, you may be wondering, ‘Do I need a deposit to get a car loan?’ 

You may be pleased to learn that you don’t necessarily need a deposit to get a car loan — however, that’s not to say that you shouldn’t be financially prepared when accessing no deposit car finance. Keep reading to learn more about how you can set yourself up for car loan success.

Getting started with a car loan

A car is a high-value item with the purchase price often in the thousands, if not tens of thousands of dollars. Not many of us have the money readily available to buy one outright, which is why so many Australians access new or used car loans.

If you need assistance in determining where to start when accessing a car loan, then don’t worry, we’re happy to walk you through some of the basics.

The first step

Commonly, borrowers don’t know whether to look for a vehicle or finance first. This ‘chicken vs the egg’ dilemma can be solved with a few different approaches.

1. Conduct some research to get an indicative loan amount

If you need to figure out how much you could be eligible to borrow, then it pays to know your borrowing limit before falling in love with a set of wheels way outside your price bracket. Checking your credit rating is a good place to start, as your credit rating often underpins your ability to borrow money. You can get a free copy of your credit report as a starting point and go from there.

Using a comparison rate may be a good idea when assessing your loan options, as a comparison rate typically tells you the total cost of the loan, including the interest rate and other fees included in the loan, such as the monthly maintenance fee. However, if your credit report shows a less-than-desirable credit score, then you may need to look at non-traditional lenders, such as Finance One, who can provide flexibility when it comes to the credit criteria and loan terms.

Keep in mind: offering the vehicle as security for a secured car loan may help in obtaining finance if you believe that you may find it challenging to access an unsecured personal loan for a car. Most lenders offer a more competitive rate for secured car loans, as they present a lower risk for the lender.

2. Look at potential cars

Once you know a ballpark figure for how much you may be able to obtain, you can get to the exciting part, which is looking for your dream car! Don’t forget that lenders not only provide finance for brand-new cars, but many will also provide loans for used cars. A used car may represent good value and is less likely to depreciate as quickly as a brand-new model.

3. Calculate your budget

It’s no secret that cars have ongoing running expenses, which is why considering factors such as maintenance costs, registration, fuel costs, and loan insurance premiums is important . You can use our car loan calculator to gauge the indicative costs of your finance on your back pocket.

Can I access a no deposit car loan?

Depending on your personal and financial circumstances, you may have the option of choosing between a car loan with a deposit or one without. However, even if the lender that you ultimately choose doesn’t require a deposit, here’s how putting some of your own money towards your car purchase may help:

Lower Loan to Value Ratio (LVR)

Your loan-to-value ratio (LVR) is the percentage of how much you’ve borrowed of the car’s total value. The lower the LVR, the less strain this puts on your credit utilisation ratio, which helps support a stronger credit score, keeps your future financing options and potentially improves your chances of getting your loan approved with your selected lender.

Lower Loan to Value Ratio (LVR)

Your loan-to-value ratio (LVR) is the percentage of how much you’ve borrowed of the car’s total value. The lower the LVR, the less strain this puts on your credit utilisation ratio, which helps support a stronger credit score, keeps your future financing options and potentially improves your chances of getting your loan approved with your selected lender.

More attractive interest rate

Making a down payment on your loan or car purchase could potentially mean accessing more favourable loan terms, including lower interest rate. Interest rates on car financing varies and is influenced by the overall strength of the application, including your credit history and the market conditions. You could potentially access a lower interest rate by offering up a lump sum payment, or accessing a lower loan amount initially by putting some of your own money towards your car purchase.

Less to repay over the loan term

There’s no hiding the fact that the less you borrow, the less you need to repay. Therefore, by making a down payment towards your loan, you have less to repay over the loan term, which means that your approved repayment schedule will be for a lower amount, and you’ll be charged less interest overall.

Better negotiating power with lenders

Working with lenders is a two-way street. Before lenders offer you a loan contract, they have to thoroughly assess your financial position and determine your suitability for the loan. By having a deposit saved, you may be able to demonstrate your sound money management and creditworthiness. This is particularly helpful if you have a poor credit history and are keen to demonstrate to lenders that you are serious about saving!

Budgeting discipline

Saving up for a deposit before purchasing a car requires discipline and sound financial management. This process encourages individuals to create and stick to a budget, which can lead to more responsible financial habits in the long run and potentially help improve your credit rating. With budgeting discipline, you may find you have extra cash to make additional repayments, helping to repay your loan early. At Finance One, we don’t charge our consumer customers early repayment fees, so if you’ve got extra cash lying around, you could potentially reduce your interest expense by repaying the loan early!

Normal lending criteria apply. Fees and charges are payable. Terms and conditions apply.

Finance One means:
Fin One Pty Ltd – ABN: 80 139 719 903
Australian Credit Licence: 387528

*Loans between $50,000 – $75,000 must be asset backed.
**48 hour approvals subject to satisfactory documentation being provided to assess the application.

Disclaimer: The information above is of a general nature only and does not consider your personal objectives, financial situation or particular needs. You should consider seeking independent advice regarding your legal, financial, taxation or other needs, to check how the information relates to your particular circumstances. We do not accept responsibility for any loss arising from the use of, or reliance on, the information. All loan applications are subject to normal lending criteria. Fees and charges payable. Terms and conditions apply.