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No deposit car insurance explained

Written by Kasey Cassells, Senior content editor

Edited by Rachel Wait, Finance Writer, 24 September 2020

If you're struggling to cover the cost of your car insurance, you might hope to find a 'no deposit car insurance deal' – but why are they so hard to come by? Read on to find out more.

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Car insurance premiums can often be expensive, and if you're expected to pay a large deposit upfront, it can sometimes put a massive strain on your finances, limiting you from making other important purchases. 

You may therefore be hoping to spread the cost of your car insurance evenly over several months instead of paying a lump sum upfront. This would be what is called ‘no deposit car insurance’, but does it even exist?

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What is no deposit car insurance?

No deposit car insurance is a term that might be used by some insurance providers to advertise car insurance where you don't need to pay an upfront deposit. However, strictly speaking, there is no such thing as no deposit car insurance.

Unfortunately, with all car insurance premiums you are expected to pay some money upfront. The amount you pay could vary depending on your circumstances and the car insurance provider you decide to sign up with, but essentially, you won’t be able to avoid paying a deposit. 

You will usually have the option of paying your premium in one go with an annual insurance policy. Or you can choose to pay in monthly instalments across the 12 months. Paying your premium off in one go usually works out cheaper, but it does mean that you will have to find a large chunk of cash to cover your insurance, which is why many people still prefer to spread their car insurance premium payments, despite the extra cost. (Interest is usually added if you pay monthly.)

If you decide to spread the cost over 12 months, many car insurance providers will require you to pay roughly 20% of the total annual insurance premium upfront and then pay the rest in equal instalments for the rest of the year.

What is low deposit car insurance?

Low deposit car insurance usually refers to the first monthly payment you make on a monthly car insurance policy, compared the full cost you’d pay if you chose an annual insurance policy. 

Many car insurers will use the phrase ‘low deposit’ in their advertising, but keep in mind this is only a small part of the overall cost of the insurance policy. 

Can I get cheap car insurance with no deposit?

There are some car insurance providers attempting to cater to the demands of those who want to pay off their annual car insurance in equal 12-month instalments.

These car insurance deals are the closest you might get to a 'no deposit car insurance' deal, but they are not all that common, and besides, you still have to make the first payment before any cover kicks in. 

If you do decide to pay in instalments, be sure to get a full breakdown of the costs. It is likely that your first payment will be higher than the rest of the payments you make, so make sure you have enough money set aside to cover that. 

A handful of car insurance providers are also starting to offer a type of monthly car insurance policy that’s more like a subscription, rather than a loan. This means you simply pay for your cover each month and cover continues until you cancel. What’s more, no interest is added to your payments. 

Alternatively, you could consider using a 0% purchase credit card to defer your first car insurance payment (and effectively pay no upfront deposit). This means you’ll be able to spread the cost of your car insurance without paying interest. However, you’ll need to check with your insurer whether it accepts credit cards and whether it will charge an administration fee if you do so.

Remember too that once the 0% deal ends, interest will kick in so make sure you’ve cleared your credit card balance before then. 

Can I get cheap car insurance with a low deposit?

If you’re looking for cheap car insurance with a low deposit, you’ll effectively be looking for a monthly car insurance policy with a low initial payment. 

However, you should never simply base your decision on the cost of the first payment and always get a full break down of costs from the insurer before you agree to anything. 

Can I get car insurance with no upfront cost? 

No you can’t. You’ll always have to pay something first when you take out a car insurance policy, even if the amount you pay is relatively small. 

All car insurance providers need to take some payment before they can provide you and your vehicle with any type of cover.

How else can I reduce costs?  

If you are looking for no deposit car insurance, chances are you are already finding it difficult to find the right cover for you and your car at the right price. 

Although you won't be able to avoid paying some costs upfront, there are steps you can take to potentially reduce the cost of the quotes you receive from car insurance companies. Take a look at our top 10 tips on cutting the cost of your car insurance.

Get a quote today using the online car insurance comparison tool below.

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