Car insurance with no deposit
It’s an expensive time for UK motorists, and so-called no deposit car insurance might seem like an affordable way of spreading your costs.
Unfortunately, there’s no such thing as car insurance with no deposit, as we explain.
It’s an expensive time for UK motorists, and so-called no deposit car insurance might seem like an affordable way of spreading your costs.
Unfortunately, there’s no such thing as car insurance with no deposit, as we explain.
What does no deposit car insurance mean?
Let’s clear a few things up here, because when something is described as ‘no deposit’, it usually means you can buy it without paying anything upfront.
But with all car insurance policies, you need to make a payment before cover can start.
If you choose to pay monthly, you’ll typically be asked to make a larger first payment of around 20% of your total premium, with the remaining payments divided equally over the next 10 or 11 months.
If you see car insurance advertised as ‘no deposit’, it just means that the total cost is split equally over the 12 months of the policy. You’ll still have to make the first payment to be covered – it just won’t be a bigger amount than the rest.
The other option is to pay for a whole year’s car insurance at once. Paying for your car insurance annually usually works out cheaper overall because there’s no interest added to the payment. But it does mean paying a large lump sum in one go.
How to get cheap car insurance with no deposit
You’ll always have to pay something upfront before your policy begins. But that doesn’t mean you’re all out of money management options…
Paying with monthly instalments
Most insurance providers offer car insurance with pay-monthly options. They let you spread the cost of your annual premium, usually by setting up a direct debit.
Your provider should give you a breakdown of costs, so you’ll know exactly how much you’re paying each month.
But before you decide to pay monthly, remember that:
- You’re likely to pay more overall because interest charges are typically added to the monthly payments.
- Insurance providers will carry out a credit check on you, which will show up on your credit report.
- You won’t be able to cancel the direct debit if you’re short of money one month.
Your credit score could be harmed if you don’t meet the repayments. That can make it much harder to get loans and other forms of credit in the future.
Paying with a credit card
If your insurance provider accepts credit card payments (and you have a good credit score), you could choose to pay for your car insurance annually, in one lump sum, using a 0% credit card.
This lets you spread the cost without paying interest – provided you can pay off the balance before the interest-free period ends. If you can manage the repayments, pay your card on time and maintain a good credit history, this could be an option.
What to consider before deciding how to pay
- Some insurance providers will split the monthly payments evenly across 12 months, but some will charge up to 20% of the annual premium for the first month’s instalment.
- A 0% credit card is only interest-free for a limited time. Once the interest-free period is over, you’ll be charged the standard rate of interest on any remaining balance. And if you miss a payment, you could lose your interest-free period and damage your credit rating.
- If you shop around, you might find an insurance provider that offers a monthly payment plan without charging interest. You’ll still have to make a payment before your cover starts, but this is probably the closest you’ll get to a no-upfront-cost car insurance deal.
Are there other ways to save money on car insurance?
If you’re on a budget, you could save money on your car insurance by:
- Increasing your voluntary excess (this is the amount you pay towards any claim you make)
- Limiting your annual mileage
- Considering telematics insurance (also known as black box insurance)
- Building up your no claims discount
- Improving your car’s security with an alarm, immobiliser or tracker.
For more ways to reduce your car insurance costs, check out our tips.
Will my deposit cover my first month’s car insurance?
Yes, your first payment will cover around 20% of your annual premium, unless your provider spreads the payments equally over 12 months.
Can I get car insurance with no deposit
No, you can’t get car insurance with no deposit. You have to pay something first – no matter how small the amount. The difference is that some insurance providers will spread the cost evenly over 12 months, rather than charging a larger first payment.
Compare car insurance quotes
Our price comparison service is a great way to compare car insurance providers and see what deals are available, whether you choose to pay monthly or annually.
Frequently asked questions
How much is the average car insurance deposit?
The size of deposit you might have to pay will vary among insurance providers, but you can expect it to be around 20% of the total cost of your annual premium. That’s unless your payments are divided equally over the year, of course.
Can I get car insurance with a low deposit if I have bad credit?
If you have a low credit rating and want to pay for your car insurance monthly, the insurance provider will carry out a credit check to make sure you can afford the repayments.
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Kate Hughes - Insurance and finance expert
As an award-winning journalist, author and broadcast commentator, Kate has been writing about personal finance for more than 20 years. She’s the former Money Editor for The Independent. Her work has appeared across the UK broadsheets as well as a number of international titles. Kate brings her financial expertise to inform her readers on ways to save money. She’s also written a book. ‘Going Zero: One Family’s Journey to Zero Waste and a Greener Lifestyle’ is available now.