When applying for finance on a used vehicle, many buyers wonder whether a deposit is necessary, and if putting a deposit down will improve their deal. In the past, it was almost expected that buyers would pay a deposit upfront, but things have changed.
At Motorlease Vehicle Finance, we deal with all the major banks on behalf of our clients and structure finance solutions daily, so let’s unpack when deposits are required, when they aren’t, and what to keep in mind when buying a used car privately.
Do You Need a Deposit for Used Car Finance?
In South Africa today, most banks no longer require a deposit when financing a used vehicle, even for private sales. Provided you qualify for the full finance amount, you can often finance 100% of the vehicle’s purchase price without putting down a cent upfront.
This has made vehicle finance more accessible, but it’s important to understand that while a deposit isn’t compulsory, there are still situations where it might be a good idea, or even required by the bank.
When Will a Bank Ask for a Deposit?
The main scenario where a bank might ask for a deposit is when the selling price of the vehicle is higher than the vehicle’s retail value. This is known as the “equity being out”, meaning you’re essentially paying more for the car than its current market value. From the bank’s perspective, this increases their risk because if the car is repossessed or sold, its resale value won’t cover the outstanding finance. In these cases, to reduce risk, the bank may require you to pay in the difference between the selling price and the acceptable retail value as a deposit, before approving the finance.
The size of the deposit required will depend on:
• The risk profile of the vehicle (make, model & year)
• Your personal credit profile
• The term of the finance agreement
Does Paying a Deposit Get You a Better Interest Rate?
Many people believe that putting down a deposit will automatically improve the interest rate offered by the bank, but that’s not necessarily the case, especially in used car finance in South Africa.
That said, paying a deposit can still be beneficial as it lowers your total loan amount, reducing both your monthly repayments and the total interest you’ll pay over the finance term.
When It’s a Good Idea to Pay a Deposit
Even though it’s not required, you might consider putting down a deposit when:
• You’d like to reduce your monthly instalment without extending your finance term.
• You want to pay less interest over the full term of the loan.
• The vehicle’s selling price is above its retail value, and the bank requires it.
When You Don’t Need a Deposit
You generally won’t need a deposit when:
• The selling price is in line with or below the vehicle’s retail value.
• You qualify to finance the full amount based on your credit profile and affordability.
• You prefer to keep cash in hand for other expenses, knowing it won’t impact your interest rate.
Final Thoughts
While deposits are no longer a standard requirement for used vehicle finance in South Africa, understanding when they might be needed and what role they play is important. At Motorlease Vehicle Finance, we always advise our clients on the most responsible, affordable finance options available, whether a deposit is required or not.
If you’re considering buying a used vehicle privately, get in touch with us. We’ll structure a deal tailored to your needs, negotiate the best terms across multiple banks, and ensure you fully understand every part of your finance agreement.