In the US, there is an estimated average cost of $1,592 for car insurance annually. Unless you reside in New Hampshire or Virginia where auto insurance is not mandatory, you are liable for accident costs.
For the drivers who can’t raise a large sum of cash, some insurance companies offer no-down-payment car insurance policies. This allows drivers to pay their premiums on a monthly basis instead of one large amount.
Although no deposit car insurance is “technically” not a thing, it’s important to note that most people will have to pay for one month of premium beforehand. No-down-payment car insurance is simply how car insurers refer to monthly payments as opposed to a lump-sum payment.
In the U.S., only a few insurance providers offer no-deposit car insurance and it’s only available to those driving with clean records and vehicles worth a great deal of money, which unfortunately means higher premiums in the long run. The fact that these policies are risky makes it hard for people with low-value cars to get involved.
The only way to find no down payment car insurance is by shopping around. Most insurers avoid policies for high-end cars because these are too expensive for them to cover.
If you’re budget is completely out of control and you can’t afford to commit a large percentage of your money up front for an automobile insurance policy, consider using the no-down-payment option. A no-down-payment option is available to residents in certain states. Make sure you compare prices before deciding on which policy to purchase.
What does no-down-payment car insurance means?
Car insurance policies are typically expensive. You need to budget for car insurance when you purchase a vehicle, especially if you can’t afford to pay for it in full. Luckily, there’s an option! No-payment car insurance plans allow you to spread the cost of your premiums over several months. The tradeoff is that these plans have a more expensive up-front price and include interest charges as well. In the end, these policies cost more in both the short and long term than paying for everything up front.
In contrast to a traditional way of purchasing a car insurance policy, you only have to pay the first month’s instalment right away. To start off with, the first “deposit” is not an additional cost. Instead, it’s just a portion of the total coverage in your policy.
Reasons why car insurance companies require down payments
In a no-deposit car insurance agreement, you agree to pay a monthly premium rather than make a lump sum deposit. This instalment typically sits at 20% of the total value of your coverage. The first instalment gets you started with your coverage and it becomes effective after that.
For policy holders, down payments act as security for insurance providers, reducing their overall risk. If a policy holder were to fail to complete their make good period of payments, the insurer will not be able to provide coverage and the new policy holder will forfeit all coverage.
When making the first payment on your no-deposit car insurance policy, you’ll find that the total price is lower after a larger down payment has been made. Insurance experts at MoneyWizard.co found that this type of financing lowers the final cost of car insurance over the long term, since your insurer will have to charge you interest only on a smaller balance.
Will No-Down-Payment Car Insurance Work for You?
Whether you should get a no deposit car insurance policy depends largely on your personal finances and the type of car you’re driving, as well as your state of residency. With a lump sum payment, you’ll know that you are covered throughout the year without worrying about finding another premium.
For drivers who cannot afford to pay for their coverage up front, it’s not financially sound. If they can only afford to pay a smaller monthly fee, then no-deposit car insurance will help them avoid leaving their cars at home until they have the full annual payment required by insurance providers. Even if they end up spending more in the long run, it’s better than not having a car and saving up to buy a policy of your choice.
The cost of no-deposit car insurance can vary a lot between different companies, so it’s always worth shopping around to get the best deal. The rate you pay for the policy will depend on how much coverage it includes and what year the car is. Because you’re saving on the cost of no-deposit car insurance, comparing rates is key.
Benefits and Drawbacks of No-Down-Payment Car Insurance
There are both benefits and drawbacks to getting a no-down-payment car insurance policy.
If a car insurance policy is too expensive, there is a way to make it cheaper. That’s great because it gives you that extra peace of mind. To sum it all up for you, when you can’t afford your car insurance payment at the time, you have to pay in 3 instalments with less than half the cost.
If you’re buying a car with no-down-payment insurance, this arrangement keeps your monthly budget lower, making it easier to afford the ultimate in automotive mobility.
Due to the annual amount, monthly premiums are easy to plan for and you won’t be disappointed. They also avoid potential insurance payment issues by syncing them with their income.
High interest costs is a downside to making a one-time payment for no-down-payment car insurance. The overall cost of the policy will be higher over 12 months, as opposed to just making a single payment. Also, missed payments may reflect negatively on your credit score.
What are the costs associated with no-down-payment car insurance?
The size of the initial instalment is what determines the amount of interest accrued on your down payment and later monthly payments. Down payment costs vary from one insurance provider to another and by state.
The average down payment in the US marketplace is:
- For a monthly premium of $100, you’ll pay 0% down payment
- For a monthly premium of $90, expect to pay 10% or $60 down payment
- For a monthly premium of $80, expect to pay 20% or $120 down payment
- For a monthly premium of $70, expect to pay 30% or $180 down payment
There are a lot of variables involved in determining what your monthly car insurance bill will be, including your age and driving history. That said, different rates may be provided to you based on these factors, but they will only give you an idea of what your actual premiums might be. To get the best estimates and learn about the insurers’ policies in your area, ask MoneyWizard.co for quotes.(unclear)
What we told you in the conclusion & recommendations
When it comes to finding a low-cost auto insurance plan, you should compare quotes while making a large first payment. Make sure that you don’t find yourself paying more when there is a much cheaper option out there.