No deposit car insurance

It’s an expensive time for UK motorists, so no deposit car insurance may seem like an affordable way of spreading your costs. The trouble is, no deposit car insurance isn’t what it seems – and could end up costing you more.

It’s an expensive time for UK motorists, so no deposit car insurance may seem like an affordable way of spreading your costs. The trouble is, no deposit car insurance isn’t what it seems – and could end up costing you more.

Daniel Hutson
Head of Motor Insurance
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Posted 19 APRIL 2021

What does no deposit car insurance mean?

When something is defined as ‘no deposit’, it means that you’re able to buy it without paying any money upfront. However, all car insurance policies require some kind of initial payment before the cover can start.

In car insurance terms, no deposit simply means car insurance providers are offering you the opportunity to spread the cost of your premium over monthly instalments. So even though you’re not paying an upfront deposit as such, you’ll have to start paying the first month’s cover immediately.

The alternative is to pay for a whole year’s car insurance in one go. Although this can work out cheaper in the long run, it does mean you’ll need to pay a large sum upfront. That’s why many people prefer to spread their car insurance costs over the year. While you’re likely to pay more overall, it does mean you can budget for your payments each month.

How to get cheaper car insurance without a deposit

Strictly speaking, there’s no such thing as no deposit car insurance. You’ll always have to pay something upfront before your policy begins. However, there are ways to spread the cost into manageable monthly payments.

Most insurance providers now let you spread the cost of your annual premium, usually over 12 monthly instalments. Your insurance provider should give you a breakdown, so you’ll know exactly how much you’re paying each month.

If you’re on a budget and can’t afford to pay off your annual premium in one lump sum, spreading your payments may seem like a more affordable option.

If your insurance provider accepts credit, another option could be to defer the first payment by using a 0% credit card. This will allow you to spread the cost of your car insurance without paying interest, provided you can repay the cost before the interest-free period ends. As long as you can manage the monthly repayments and have a good credit history, this could be an option.

However, you should be aware of the following before deciding on a payment method:

  • Most insurance providers will charge around 20% of the total annual premium for the first month’s instalment, then equal monthly instalments for the rest of the year.
  • Interest will most likely be charged on direct debit instalments, which could end up costing you between 10% to 25% more over the course of the year.
  • If you decide to pay for your car insurance with a credit card, you may have to pay an administration fee in addition to the cost of your premiums. You’ll then have to make sure you can pay off your balance, so that you don’t end up with additional interest charges on your credit card.
  • A 0% credit card is only interest free for an agreed length of time. You also need to keep a close eye on managing your finances. Just one missed payment and you could lose your interest-free period, be asked to pay the full amount owing immediately and even damage your credit rating.
  • A few car insurance providers are starting to offer monthly repayment deals with no interest. By shopping around, you may be able to find a car insurance deal where you can pay monthly without added interest charges. You’ll still need to make the first payment before your cover starts, but this is probably the closest you’ll get to a no deposit car insurance deal.

How else can I save money on my car insurance?

Spreading the cost of your car insurance can help if you’re on a budget, as long as you’re aware of the potential overall costs. However, there are other ways to save money on your car insurance, for example:

For more ways to reduce your car insurance costs, check out our top tips for cheap car insurance.

When will I start paying for no deposit car insurance?

Technically, no deposit car insurance doesn’t exist. One way or another, you’ll need to start paying for your car insurance as soon as you sign up for a policy.

Will my deposit cover my first month’s car insurance?

If you pay by direct debit, a part of the annual cost of your car insurance will be bundled together with the interest and the deposit. If you pay for the year in one go, you won’t be charged interest.

So, can I get no deposit car insurance?

No, you can’t. It’s not possible to take out car insurance without paying something first – no matter how small the amount. All car insurance premiums require some form of upfront payment. However, by spreading out your payments and taking steps to reduce the cost of your premium, you should still be able to save money and get a good deal.

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