No deposit car insurance
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.
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 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 will have to start paying the first month’s cover immediately.
Can I spread the cost of my car insurance?
Yes, 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.
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, and 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 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.
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:
- Increasing your voluntary excess.
- Limiting your annual mileage.
- Consider telematics insurance.
- Building up a good no claims discount.
- If you’re a young driver and you’ve just passed your test, consider taking a Pass Plus advanced driving course.
For more ways to reduce your car insurance costs, check out our top tips for cheap car insurance.
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