Can I really buy car insurance without having to pay a deposit?
There are three ways of buying car insurance without a deposit:
1) Apply for an interest-free credit card. Then you will really get car insurance with no deposit! Some of these let you pay off a bill for up to two years or more interest free, but it is vital that you stick strictly to their repayment terms to avoid charges.
2) If you are insured at the moment, ask your current insurer if they will accept monthly payments in the future. Some will.
3) Calculate whether you would save money by putting the whole premium on your credit card. If you compare car insurance quotes but specify that you want to pay annually, then repeat the search specifying monthly payments, you will probably find that some of the cheapest car insurance companies don't accept monthly paying customers so if you pay the full sum in advance by credit card you may qualify for a much lower premium. Give it a try! Yes you will pay interest on your card but if you make regular payments over a year this will be on the reducing balance, not on the full premium. Plus the quicker you pay this off the less interest you will be charged, which is not the case if you make regular payments directly to the insurer.
Should you really pay monthly for car insurance?
Does no deposit car insurance really exist?
You will have to pay at least something for a cheap deposit car insurance scheme but if you compare quotes you may find a much lower premium - and the lower this is, the lower the deposit should be. It may not be possible to pay nothing at all in advance, but very low deposits are certainly available.
Every insurance company in the UK will require at least a small payment in advance, particularly if black box insurance is chosen. That is because this type of policy involves fitting equipment to your car, and the insurance provider may want a car insurance payment upfront to cover this. This can be paid by credit card, which leaves you with more time before you have to actually put your hand in your pocket.
How little can I pay in advance?
The initial payment can be as small as one twelth of the total premium, including any credit charges. However this can vary according to your age and experience. Generally speaking younger drivers have to find the largest deposits for their car insurance, whilst the over 50s usually face much smaller ones.
The most common deposit in 2019 was 20% of the total payable: in other words 20% of the inital premium plus the interest charge - the balance to be paid monthly by direct debit. This could vary enormously though which is another good reason for comparing multiple quotes.
There are usually up to eleven further equal monthly payments, so you should be able to spread the cost over a whole year. There is almost invariably an administration fee (which may rely on your credit history)for credit payments, so it is cheaper if you can pay the whole premium in advance. However, by comparing prices you can not only search for the cheapest policy overall, but you can look for the ones with the lowest charges for monthly repayments, too. It is, therefore, quite possible for you to end up paying less than your current insurer is charging you, even allowing for any extra finance charges.
If I want to stop the monthly payments, can I cancel the policy?
Most car insurance policies can be cancelled, subject to the insurer's terms and conditions.However, there is only a partial refund (if any at all) of the premium in most cases. Since every car insurance company sets it's own terms, you would be well advised to check them carefully before buying a policy. They are easily accessible when you get your quotation. Some car insurance providers make very high charges in the event of cancellations, but others are far more generous.
It is important to remember, though, that you are agreeing to buy 12 months of car insurance. If you cancel mid-term you may well find that you are contracted to continue making some payments.
If you think you may need less than a year's cover, perhaps you should consider a short-term car insurance policy instead.
How many people buy 'no-deposit' policies?
Reports indicate that more than 50% of motorists pay for their policies monthly, particularly those who own cars in a high insurance group. With rising premiums, more and more motorists are finding it difficult to justify paying out large sums in advance for their car insurance policies. As a result insurers have recognised that there is a large potential market that they can tap into. Some of them even offer generous introductory discounts to car owners who leave their existing insurers to take out one of their policies, so you may find some very attractive offers indeed. Get a quote for a small deposit car insurance deal to see for yourself.
Does it cost more to pay monthly for car insurance?
Almost invariably: yes, low deposit car insurance will probably be more expensive than paying with one lump sum. If you extend your payments you will in effect be obtaining a loan. The deposit insurance company, or a credit broker it works with, will probably charge you interest. This can vary depending upon your circumstances and credit rating. 11% of the total premium is a typical figure but this can vary enormously.
In other words: if your initial premium was, say, £600, and the finance charge was 11%, you would pay a total of £666.
I have poor credit. Can I still pay monthly?
This depends on the insurance companies you look for quotes from. They will consider all the factors, such as your postcode, age, driving experience, occupation etc before deciding whether or not to offer you monthly terms, and deciding on the policy cost.
Can I buy monthly cheap deposit car insurance without a credit check?
No. If you apply for low deposit car insurance all insurers will carry out a credit check before deciding whether or not to agree to it. This will leave a hard record on your credit file. It is important not to make too many applications to an insurance provider since repeated requests for a monthly payment plan can raise red flags for car insurers.
Will getting too many quotes for car insurance affect my credit score?
No. Insurers that are interested in giving you a quote for low deposit car insurance will probably check your credit file and this will be recorded but it will only be what is called a 'Soft Search'. This will be visible to you if you check your own record, but not to future potential lenders.
The only time that there will be a 'Hard Search' recorded; which will be visible to other lenders who check your file; will be if you accept a quote and actually apply to the relevant insurer for a pay-monthly policy.
If on the other hand you apply for a policy and pay the full lump sum premium in advance there will be no Hard Search because it will not be necessary.
What if I am turned down because of bad credit?
Don't give up hope. A drawback of getting quotes from price comparison sites is that you are not dealing with human beings who you can discuss your issues with. The site may turn you down for reasons that a human car insurance broker may be perfectly happy with. If this happens to you, you could contact a specialist deposit car insurance broker through a site which specialises in finding pay-monthly policies for people with an adverse credit record such as refusedcarinsurance.com.
Can I pay monthly without interest?
We have seen the odd 'no interest' offer from insurance providers in the past. However these have still not necessarily provided the best pay monthly car insurance value, even without any interest or management charges.
You would also have to bear in mind that these charges would return at renewal time; and many people automatically renew their car insurance premiums without looking too carefully at how much they are paying, and for what.
So, rather than jumping at a 'zero-interest' offer, you would probably get a better deal by comparing multiple quotations.
Why won't some of the cheapest insurers let me pay monthly?
If you get quotes for car insurance that you pay for yearly, and then repeat it but specify monthly instalments, you are likely to find that the cheapest companies for the annual option don't offer cheaper car insurance quotes for the extended payments option. However these companies won't necessarily turn you down if you pick up the phone and ask their customer services people if they can help you. It may save you a lot of money so it's worth a try. First, specifying "yearly payments", compare quotes; select your chosen insurer; then you'll be given contact details to ring them. They are usually very helpful and although no deposit car insurance is a myth you may still be able to pay monthly, with a small first payment,even though they don't advertise it.