How much deposit do I need for a car loan?

While a deposit isn’t always mandatory for a car loan in Australia, putting money down upfront can significantly improve your loan options, lower your repayments, and even increase your chances of approval.

Here’s everything you need to know about car loan deposits, how they work, and what amount is right for your situation.

Do you need a deposit for a car loan?

The short answer is no. Many lenders offer no-deposit car loans, which means you can borrow the full value of the vehicle. Some lenders may even fund more than that to cover additional costs like registration, insurance, or extras.

However, while it’s possible to finance 100% or more of your purchase, many buyers still choose to put down a deposit, because it’s one of the most effective ways to reduce the overall cost of the loan and boost your approval chances, especially if you have a limited credit history or less-than-perfect credit.

How do car loan deposits work?

Car loan requirements are usually based on something called the loan-to-value ratio (LVR). This represents the percentage of the vehicle’s purchase price that the lender is willing to finance. If a lender offers an LVR of 90%, that means you’ll need to come up with the remaining 10% as a deposit.

Some lenders offer a full 100% LVR, or even more, but these loans may come with stricter eligibility criteria, higher interest rates, or tougher approval conditions. On the other hand, placing a deposit reduces the lender’s risk and often leads to better outcomes for the borrower.

The benefits of putting down a car loan deposit

There are multiple advantages to paying a deposit on your car loan, beyond simply reducing the total amount you need to borrow. A deposit reduces your loan amount, which means you’ll pay less interest over the life of the loan. Even a 10% deposit can add up to thousands of dollars in savings, depending on the term and interest rate.

When lenders see that you’ve saved up and are willing to contribute to the purchase, they might be more likely to approve your loan, especially if you have a patchy credit file. A deposit signals financial discipline, which lenders value. 

Buyers who put down a deposit may also be eligible for lower interest rates. Lenders view these applicants as lower-risk, which means they’re more inclined to offer competitive terms.

Having a deposit broadens your choices. Some lenders only offer products to borrowers who meet specific deposit thresholds. By putting money down, you gain access to more loan products and possibly better features. 

With a deposit in hand, you might be able to stretch your budget slightly further. You’ll have more flexibility in negotiating with dealers and may even qualify for a newer or higher-spec vehicle without increasing your repayments.

The best place to start when looking for a car and a car loan is to speak to a finance broker. We can compare your options and find something that is suitable for your needs.

*This information is general in nature and does not take into consideration your individual circumstances. Please contact us for further information.