Can I get car insurance without having to pay a deposit?
Car insurance can be expensive, especially if you pay for a full year’s cover up front. This is where no-deposit car insurance can be useful.
No-deposit insurance is a term used to describe paying for your motor insurance on a monthly basis rather than in a single lump sum when the policy starts. It’s sometimes called ‘low-deposit insurance’, but this is the same thing.
If you choose to pay monthly, you’ll still have to make your first payment before your policy starts. But this initial amount should be much less than if you were to pay the whole premium at once.
This can be really useful if you want to avoid putting your finances under extra strain. Bear in mind that this initial payment is often larger than the subsequent monthly payments.
For example, you might pay 20% of the total policy cost at the start, and then the remaining 80% in equal instalments over the following 11 months.
When you pay monthly, your insurance provider will set up a direct debit on your bank account so the monthly payments are made automatically. The insurer will run a credit check if you apply to pay monthly, to ensure that you’re in a financial position to make the payments. If you miss any payments, your credit score could be affected.
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Does it cost more to pay monthly?
Paying monthly for your car insurance is normally more expensive overall than paying upfront. This is because your insurer is effectively loaning you the cost of your annual premium – less the initial payment mentioned above – and charging interest on this loan.
The level of interest you have to pay, and therefore the size of your monthly premiums and total cost of insurance, depends on things like your your credit score.
How can I get cheap car insurance with no deposit?
All car insurance policies require some sort of payment before cover kicks in. There are ways to help reduce the cost of your quote to help make things more affordable
Check your annual mileage
How much you pay for car insurance depends partly on how much you use your vehicle. Make sure the annual mileage figure you put on your application is accurate. If it’s too high, you could end up paying more than you need to for cover.
Make sure you don’t have unnecessary add-ons
If your policy has extras you don’t need, such as insurance for driving in Europe or even breakdown cover, you could save money by cutting back on them.
Buy your policy early
Research suggests that buying your policy shortly after getting a renewal notice – typically 28 days before your policy expires – can save money. Insurers are thought to view drivers who leave it to the last minute as more of a risk. Acting early can also give you more time to compare policies and get the best price.
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What other insurance options are available?
While standard car insurance policies are the typical option, there are also alternative types of cover that might be more suited to your needs.
Temporary car insurance
A temporary motor policy can let you insure a vehicle for anything from a few days to several months. If you don’t need cover for a full year, this could be a more cost-effective option – but it is unlikely to be suitable for everyone.
Black box insurance
Black box or telematics insurance can help you cut the cost of cover by rewarding you for careful driving. Customers install a device in their vehicle to monitor the likes of speed, acceleration and the times of day you typically use your car.
Pay as you go insurance
If you don’t use your car very much, you could save money with a pay-as-you-go policy. Like black box insurance, this type of cover relies on a device inside your vehicle that records distance driven. Pay-as-you-go – also known as pay-per-mile – is best suited to motorists who use their cars much less than average. Pay-per-hour insurance works similarly, but premiums are based on the time you spend on the road rather than the distance covered.
"When you take out a car insurance policy, you'll always have to pay something upfront, so technically there's no such thing as 'no-deposit' cover. But if your finances are under pressure, spreading the cost over a number of monthly payments can really help."
Does credit rating affect the cost of my car insurance?
Because no-deposit car insurance involves the provider effectively loaning you some of the cost of the annual policy, your credit rating will affect how much you pay. If you’ve previously missed repayments on a credit card, loan or mobile phone contract, this might have harmed your credit rating. You could pay a higher level of interest as a result.
Generally speaking, the worse your credit rating, the more expensive it will be to pay monthly for insurance as opposed to paying upfront.
Bear in mind also that simply applying for pay-monthly insurance and having a credit check carried out will be noted on your credit record – even if you don’t go ahead with the transaction. It can sometimes count against you if your credit record has a lot of checks on it.
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