Very Cheap Car Insurance With No Deposit: A Good Option For New Drivers?
JA
Summary:
While very cheap car insurance with no deposit may sound like an enticing opportunity for new drivers to save on their car insurance, it does not exist. It’s simply a common marketing tactic car insurance companies use to market monthly payment plans. Instead of requiring you to pay your annual insurance premium in full upfront, “no-deposit” car insurance allows you to spread the cost over 12 months so you only have to pay a portion of your annual premium for coverage to begin.
If you’re a new driver on the hunt for affordable car insurance, you’ve probably come across policies advertised as “no-deposit” car insurance. However, when something sounds like it’s too good to be true, it usually is.
Car insurance companies that don’t require you to make a payment before providing coverage simply do not exist. And if you have limited driving experience, insurance companies will view you as a high-risk driver and require a higher deposit to ensure adequate coverage.
So, where does the idea of “cheap car insurance with no deposit” come from? We explain the reality behind the term below.
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What is very cheap car insurance with no deposit?
Actually, there’s no such thing as very cheap car insurance with no deposit or no-money-down car insurance. It’s simply a marketing tactic that car insurance companies use to advertise car insurance policies that you can pay for in monthly payments, as opposed to paying for the entire year’s worth of insurance in one lump sum.
In short, no-down-payment car insurance does not exist. Most car insurance companies won’t take on the risk of insuring someone who hasn’t paid their premiums, so you’ll always need to put some money down before you’re insured.
How does very cheap car insurance with no deposit work?
First, it’s important to note that your down payment amount is not an additional car insurance premium. Whatever you pay as a down payment will be deducted from your future monthly payments since it’s already built into your rate. In other words, the higher your first payment, the less you pay for your monthly premiums. And vice versa.
The amount of your first payment may vary depending on your payment plan, but it’s generally large enough to cover the insurer’s onboarding costs. And while the no-money-down payment plan may seem like you’re saving money, you may actually be paying more over the long run. This is because auto insurance companies generally offer discounts to those who pay their annual premiums in full upfront.
For example, if a car insurance company offered a 5% discount for paying in full and you received a rate of $840, you could pay $798 your first month and save $42. If you opt for a “no deposit” payment plan, you only have to pay $70 in your first month. However, you won’t save any money over the course of your policy term.
Similarly, some insurance providers may lure you with an even lower first-month payment of $50, for example. But to compensate for the discount, you’ll have to pay higher premiums for the following 11 months.
| First month’s payment | Other 11 monthly payments | Total cost |
|---|---|---|
| $798 | $0 | $798 |
| $70 | $70 | $840 |
| $50 | $71.80 | $840 |
Who can get no-deposit car insurance
Generally, no-deposit car insurance is available to low-risk drivers such as those who:
- Have a good driving record with no accidents or traffic violations
- Have a good credit score
- Are older and more experienced drivers
So, if you’re a new driver with little experience on the road, your total car insurance rate may be higher. You also may have to shell out a bit more in the first month. However, each insurance company has its own policies and criteria for determining who’s eligible for “no-deposit” car insurance or lower first payments. It’s best to shop around and compare quotes from different insurers to find the best deal.
Are there downsides to monthly car insurance payments?
Splitting your insurance costs into smaller and more manageable monthly payments may seem like an appealing choice. However, make sure you’re aware of the downsides of this payment plan before committing to it.
- Higher total cost. Paying monthly installments usually comes with extra fees and interest, which can add up and ultimately increase the overall cost of your car insurance policy.
- Potential late fees. If you miss a payment, your auto insurance company may charge you a late fee or penalty. Over time, these charges can accumulate and add to the overall cost of the car insurance policy.
- Risk of lapses in coverage. If you don’t make your monthly payments on time, you risk a lapse in coverage. This can leave you uninsured, meaning you’ll have to pay large costs out-of-pocket in case of an accident or other unexpected event.
Pro Tip
Always read your car insurance declarations page before signing the dotted line. This page outlines your insurance coverage, the deductibles you’re responsible for, and any limits or exclusions to your policy.
Ways to save money on auto insurance
Lower first payments may seem appealing, but they can often lead to higher premiums later on. Here are some other ways to make your car insurance payments more manageable without sacrificing quality coverage.
1. Shop around
Get quotes from multiple insurance companies and compare the coverage and premiums. Some insurance companies offer discounts if you’re a new customer or if you bundle policies. (Bundling means you’re purchasing multiple policies from one insurance company.)
2. Choose a higher deductible
A higher deductible means you’ll have to pay more out of pocket in case of an accident, but it can lower your monthly premiums. Just make sure you can comfortably afford your chosen deductible before making the switch.
3. Opt for lower car insurance coverage
If you have an older car (more than 10 years old), you may not need comprehensive coverage, collision coverage, or high liability limits. Instead, liability-only coverage may be sufficient. Talk to a qualified car insurance agent to see whether it’d make sense to lower your car insurance premiums by reducing your coverage.
4. Talk to an independent insurance agent
P.J. Miller, vice president and independent insurance agent with Wallace & Turner Insurance, says, “Independent insurance agents can walk you through options for coverage and address any questions you have. And because they work with a range of carriers, they can also do the ‘shopping around’ for you to obtain quotes that work with your budget and coverage needs.”
He emphasizes that while online quotes are useful, as a new driver, you often don’t know the extent of coverage you need, which could lead to inaccurate quotes. For this reason, working with an independent insurance agent may be helpful.
5. Take a defensive driving course
Defensive driving courses teach you how to proactively anticipate dangers on the road and reduce the risk of getting into an accident — which is especially helpful if you’re a new driver. Plus, some car insurance providers offer discounts (anywhere from 5% to 20%) to drivers who complete a defensive driving course.
6. Stay on your parents’ policy
Brad Cummins, an insurance expert at Insurance Geek, says, “As a new driver, staying on your parents’ car insurance policy can have several benefits. You may be eligible for discounts and benefits, such as a multi-car discount, auto/home discount, and lower rates based on your parents’ good credit score.
So, if possible, consider staying on your parents’ car insurance, especially if you’re a new driver.
a multi-car discount… and lower rates based on your parents’ good credit score. — Brad Cummins, insurance expert at Insurance Geek” content=”Staying on your parents’ car insurance policy can have several benefits… [like] a multi-car discount… and lower rates based on your parents’ good credit score. — Brad Cummins, insurance expert at Insurance Geek” style=”default”] 7. Compare car insurance providers
Finding the right car insurance policy takes some legwork. If you’re feeling overwhelmed by the amount of car insurance options on the market, don’t worry.
To make life easier for you, we’ve put some of the best auto insurance companies side-by-side. Request a quote from each of our recommended insurance providers and see which policy suits you best.
FAQs
How can I find very cheap auto insurance with no deposit?
The reality is that most insurance companies won’t provide coverage without requiring you to make the first month’s payment upfront. This “no-deposit” scheme is simply a marketing tactic to promote car insurance with monthly payments.
However, this doesn’t mean you can’t find affordable auto insurance. By comparing car insurance rates and coverage options from different providers, you can find a policy that fits your budget without sacrificing the coverage you need. Plus, car insurance companies often offer various types of discounts, such as a defensive driving discount.
What are the benefits of very cheap car insurance with no deposit?
Instead of shelling out hundreds or potentially a thousand dollars or more upfront, paying monthly installments allows you to spread the cost of your car insurance over the year. This makes it easier to manage payments and stick within your budget. However, paying monthly installments may come with extra fees, so check with your car insurance company beforehand.
Can I get car insurance without making any upfront payment?
No. Legitimate car insurance companies require you to make an initial payment before insuring your vehicle. Insurance providers that promise no money upfront could be scammers that can leave you with inadequate coverage or even no coverage at all. Be sure to perform your due diligence before settling on a car insurance provider.
Which companies offer no-deposit car insurance?
Many car insurance providers offer “no-deposit” car insurance that allows you to pay monthly instead of a year’s worth of premiums upfront. While paying monthly may result in a higher total cost, it provides a solution to those who can’t afford to make large payments all at once. Some car insurance companies that provide monthly payment plans include Geico, State Farm, and Progressive.
Key Takeaways
- There’s no such thing as very cheap car insurance with no deposit or no-money-down car insurance. It’s simply a marketing tactic to advertise car insurance with monthly payments.
- Generally, “no-deposit” car insurance is available to low-risk drivers such as those who have a good driving record, good credit score, and are older and more experienced.
- Paying monthly installments usually comes with extra fees and interest, which can add up and increase the overall cost of your car insurance policy.
- To save on auto insurance premiums without sacrificing quality coverage, shop around for quotes from different insurers, choose a higher deductible, opt for lower car insurance coverage if applicable, and consider completing a defensive driving course.
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