Car finance: what is a deposit?

  • What do I need to know about finance deposits?
  • How do I make the most of a deposit?
  • Parkers explains car finance terms
  • What do I need to know about finance deposits?
  • How do I make the most of a deposit?
  • Parkers explains car finance terms

A deposit is the upfront payment put down by a customer at the start of a car finance scheme.

What do I need to know about deposits?

The more deposit you put down initially on a finance plan – such as PCP, Hire Purchase and PCH/leasing  the lower your monthly payments will be.

While some brands let you finance a car with no deposit, others demand that you put down a minimum deposit to access the best deals with the lowest APR charges.

Standard deposits typically stand between 10 and 25 percent of the list price.

How do I make the most of a deposit?

Where APR charges are high – anything over around four percent is on the high side – you’re better off putting down a large deposit, as this will reduce the amount of interest you’ll pay overall.

In the case of low interest charges, the size of deposit has little effect on the total amount you’ll have to stump up. Meanwhile, where interest-free credit is available, the amount of deposit has no impact on the overall bill – though the larger the deposit, the lower the monthly payments.

Similar to

Deposit contribution, initial payment, initial rental

Want to find out more about car finance? Take a look at our car finance section or head to the Parkers Car Glossary for more motoring meanings

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