There are many lenders that offer no-deposit car loans in Australia. This can be handy if you don't have savings or don't want to pay a deposit upfront when you get a car.
But it can also affect the loan costs and conditions. So it's still important to compare different options before you apply.
Key takeaways
A no deposit car loan allow you to finance the full cost of a vehicle without needing an upfront payment, using the car as security.
Be aware that interest rates can be higher with no deposit loans.
Opting for a shorter loan term can help you save on interest, but make sure the higher monthly payments are affordable for your financial situation.
How do no-deposit car loans work?
A no-deposit car loan is a type of secured personal loan that provides funds for you to buy a new or used car. Unlike a home loan or some other car loans, this product does not require you to pay a deposit towards the purchase price of the car.
Instead, the car you buy is typically used as security for the loan.
Pros
Buy a car sooner. You don't need to wait to save up a deposit, which is helpful if you need a car urgently.
Finance the full amount. You can borrow 100% of the car's value, which reduces upfront costs.
Keeps money free for on-road costs. Financing the full amount can free up cash for other upfront costs like rego, insurance or servicing.
Cons
Higher interest rates. Borrowing the full amount can be riskier for lenders, so they may charge more.
Larger repayments. Without a deposit to reduce the loan size, your monthly repayments will be higher.
Stricter approval. Lenders may require a stronger credit history, stable income or security like a guarantor.
You could owe more than the car's worth. Cars depreciate quickly and without a deposit, you may end up with negative equity early on.
What are the costs?
The costs and charges associated with a no-deposit car loan vary depending on the lender, but here are some of the most common:
Establishment fee. This fee covers the cost of setting up your loan. It is usually added to the loan principal and you'll need to pay it off along with the rest of the money you borrow.
Ongoing monthly fee. You will usually need to pay a monthly maintenance fee on your no-deposit car loan.
Early exit or early repayment fee. If you repay your loan early, the lender may levy a fee against you to help recover its lost interest.
Additional repayment fees. Some lenders will charge a fee if you make additional repayments above and beyond your approved repayment schedule.
Late payment fees. If you're late making a repayment or you miss it altogether, expect to be charged a fee. You should familiarise yourself with the amount of this fee before you apply for a loan.
What factors will affect your ability to get a no-deposit car loan?
While requirements vary between lenders, you typically won’t qualify for a no-deposit car loan if:
You don’t have any credit history. If you can’t demonstrate a history of borrowing money and then making on-time repayments to pay off your debt, lenders can’t examine your track record as a borrower. As a result, they will usually require you to pay an upfront deposit.
You have a bad credit history. Bad-credit borrowers are viewed as posing a higher risk to lenders, so most will require you to have a deposit saved if you want to qualify for a car loan.
You have negative equity on your current car. If you’ve previously borrowed money to buy a car, and the value of that car is now less than the outstanding balance you owe on the loan, you’re considered to be in negative equity and your lender will require a deposit.
The sale price of the car exceeds its book value. In some cases, the sale price of the car you want to buy may be above its book value, such as if the vehicle has been modified or has been well looked after and is in excellent condition. When this happens, you may need a deposit to ensure that your loan amount falls within the lender’s loan to value ratio (LVR) guidelines.
We currently don't have that product, but here are others to consider:
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How we picked these
Finder Score for car loans
To make comparing car loans even easier we came up with the Finder Score. Interest rates, fees and features across 200+ car loan products and 100+ lenders are all weighted and scaled to produce a score out of 10. The higher the score, the more competitive the product.
Finder survey: Have Australians of different ages ever taken out a car loan?
Response
Gen Z
Gen Y
Gen X
Baby Boomers
No
70.79%
62.5%
54.28%
59.94%
Yes
29.21%
37.5%
45.72%
40.06%
Source: Finder survey by Pure Profile of 1113 Australians, December 2023
How to compare no deposit car loans
Check the loan amount
Because you're not paying a deposit, the amount you need to borrow will obviously increase. You will therefore be borrowing 100% or even more of the value of the car you're buying, so make sure you will be able to afford to pay off your debt.
Compare interest rates
Finding the lowest interest rate can save you thousands of dollars over the life of a loan, so shop around for a competitive rate. Lenders offer both fixed and variable rate loans, so make sure you compare rates across the same types of loans.
Analyse the Fees
Establishment fees, monthly fees and any other fees add to the overall cost of the loan. So checking these fees when you compare different options can help you save.
Check the loan term
If you choose a longer loan term, your repayments will be lower. But it will take you longer to pay off the loan and could cost more in interest charges and fees.
Manage the repayment schedule and flexibility
How often will you need to make a repayment and what will the regular repayment amount be? If you come into some extra cash and want to make an additional repayment or even pay your loan off early, can you do so without incurring any extra fees?
Investigate any additional features
Some lenders may require you to take out additional loan features, such as loan insurance. This insurance is designed to cover you if you're unable to afford your loan repayments, but be aware that the money you pay for insurance premiums doesn't go towards paying down your loan amount at all.
Factors to look out for with no-deposit car loans
Borrowing too much. Having no deposit means you will need to borrow more than usual, so it’s important to be sure you can afford to pay back the money you borrow plus interest.
Early repayment fees. Don’t assume that a lender will allow you to pay your loan off ahead of schedule if you wish. Early repayment fees apply in many cases, so make sure you’re aware of these charges before you apply for a loan.
Car eligibility. Lenders will not offer no-deposit car loans for all vehicles – for example, if you’re buying a used car that’s more than 10 years old, you may find that you can only get financing through an unsecured personal loan.
Seller conditions. In some cases the dealership or private seller you're buying a car from may ask for a deposit. For example, the NSW government states that it is "common practice for dealers to take a holding deposit when you sign a contract". Be aware that this is a different type of deposit that you may need to pay, even if you get a no-deposit loan elsewhere.
What you need before applying
If you’re searching for a no-deposit car loan, make sure you meet the eligibility criteria. You will usually need:
To be 18 years of age or older
Australian citizenship or permanent residency
A good credit history
Regular income
During the application process you need to provide:
Your name, contact information and personal details
Proof of ID
Details of your employment and income
Information about your liabilities and outstanding loans
Details of the vehicle you wish to purchase
Once you’ve compared a variety of loan options and decided on the right one for your needs, you can apply for financing and hopefully access the funds you need to get behind the wheel of your next vehicle.
Frequently asked questions about no-deposit car loans
A no-deposit car loan allows you to finance the full purchase price of a new or used vehicle without needing an upfront deposit. This means you can borrow 100% of the car's value, making it easier to buy a car if you don't have available savings but can afford the ongoing repayments.
The availability of no-deposit car loans depends on a lender's maximum loan-to-value ratio (LVR). This is the maximum percentage of the car's value that the lender is willing to let you borrow. Before agreeing to lend you money to buy a car, a lender will calculate the LVR figure for your desired loan amount by dividing the loan amount by the value of the vehicle.
If this figure is within the lender's LVR guidelines, you may be approved for financing. LVR guidelines differ from one lender to the next, with some offering flexible LVRs of up to 150% or even 180% of a car's value.
Yes. Some lenders can offer car loans to borrowers who can’t provide the usual proof of income.
Yes. If you’ve saved a deposit, any loan you apply for will have a lower LVR and therefore be seen as lower risk by a lender. A deposit can also demonstrate your ability to put aside genuine savings and provide proof of your solid financial position.
Tim Falk is a writer for Finder, writing across a diverse range of topics. Over the course of his 20-year writing career, Tim has reported on everything from travel and personal finance to pets and TV soap operas. When he’s not staring at his computer, you can usually find him exploring the great outdoors.
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