What is a deposit contribution?

Last updated May 05, 2021

A deposit contribution is a sum of money contributed by a car dealership or manufacturer towards the deposit paid by the buyer. In most cases, they are only available when you are taking out a finance agreement to fund the purchase of a car.

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Why are deposit contributions provided?

A car deposit contribution is usually provided when a dealer or manufacturer needs to increase sales either across their entire fleet or for a particular model. This might be the case if a model hasn’t sold as well as projected or if there is a newer incoming model. By providing deposit contributions to buyers, dealerships or manufacturers may be able to increase sales and hit targets towards the end of a financial deadline.

How do deposit contributions work?

If you opt to purchase a car using a deposit contribution, you will likely be taking out a finance agreement. The money offered will be added to the deposit that you are paying for the car, acting as a discount on the price of the vehicle and reducing the amount you’ll repay over the course of the finance agreement.

For example, if you’re buying a new car that is worth £30,000 and it has a deposit contribution of £3,000, the amount of finance will drop to £27,000. If you then pay an additional £3,000 deposit yourself, the total deposit will be £6,000. This means that you will only need to finance £24,000 rather than the £27,000 you would without the dealership or manufacturer contribution.

In some cases, there is a maximum deposit you will be allowed to put down on a car if you’re using a deposit contribution, to ensure the finances are still viable for the dealer or manufacturer. It is worth enquiring to see if this is the case and reading all other supporting documentation before taking out a finance agreement.

What is the advantage of using a deposit contribution?

The primary benefit of using a deposit contribution is that the overall cost of the car is reduced, whilst not explicitly being discounted. Essentially, whoever is providing the funds is paying a certain amount off the car in the form of a deposit, providing you meet the terms of the agreement.

Sometimes, a deal can mean that you don’t have to pay any deposit at all (or a nominal fee such as £1). However, it is worth taking into consideration that your monthly payments will be lower if you pay a higher deposit and it may reduce the overall cost of the finance agreement unless it is a 0% finance offer.

What are the disadvantages of using deposit contributions?

A deposit contribution doesn’t always result in you getting the best deal for a car, even if it seems a good deal at first glance. This is due to some contribution offers being reserved for specific finance products, which results in you paying more in the long-term.

When taking out any form of car finance, you should always look at the amount of interest payable over the course of the agreement. If you receive a deposit contribution, but the interest rate is higher than other offers available, you may end up paying more over the term.

Finally, if you are part exchanging your current car to use as your part of the deposit, you should ensure you’re getting a good deal. To find out how much your car is worth and have cash to use as your deposit, you can get a valuation in less than 60 seconds by entering your reg number using our car valuation tool.

So, should I use a deposit contribution?

Whether or not you use a deposit contribution depends on whether it’s the best deal available. You should always make sure you look at the financial agreement in detail and ensure that the overall costs and monthly payments meet your budget. If you are not happy with the deal, don’t be scared to walk away and look elsewhere.