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No deposit car insurance

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*Based on data provided by Consumer Intelligence Ltd, www.consumerintelligence.com (October '22). 51% of car insurance customers could save £348.45

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What is no deposit car insurance?

Many car insurance companies use the phrase 'no deposit car insurance' to mean that you don't have to pay the whole amount in one go.

This is how they promote their monthly car insurance deals that let you pay by direct debit. All this does is spread the cost over 12 monthly payments.

But you still have to pay something upfront before you get behind the wheel. This isn't a deposit - it's the first payment of your direct debit.

You can't get a car insurance policy without having to pay something first.

Is it better to pay annually or pay monthly?

Paying annually:

  • After making the payment, you're all done. No worrying about budgeting for your car insurance policy.
  • Paying annually often works out cheaper. Most insurers will charge interest or an admin fee if you choose to pay monthly and could end up costing you over 16% extra***.
  • It's a single, large sum of money going out of your bank at once.
  • If you cancel your car insurance policy, it might be extra admin to get any kind of refund.

The decision to pay annually or monthly for your car insurance should be yours to make. Your circumstances should dictate which option you go for, but there are some pros and cons for each.

So, if you can afford it, paying annually is usually the less expensive option.

Paying monthly:

  • Smaller, more manageable payments make it easier to budget.
  • Cancelling your policy means you cancel the direct debit. No more payments to make, no refund necessary.
  • If you fail to make the monthly payments you risk invalidating your car insurance policy.
  • Paying monthly is usually more expensive as insurance companies often add interest to the price.

***Based on Confused.com data Jan 2022 - Jun 2022

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How can I reduce my car insurance costs?

Paying for your policy in one annual lump sum is only one way to keep your car insurance costs in check.

There are several factors that determine how much you pay for your car insurance. That means there are multiple ways to bring your costs down, including:

  • Increasing your voluntary excess
  • Enhancing your car's security
  • Downsizing your car
  • Building your no-claims bonus

Increase your voluntary excess can lower your car insurance costs. Your car insurance excess is an amount you pay toward any claim you make. There are 2 parts to this:

  • Compulsory excess
  • Voluntary excess

You can't change your compulsory excess - your car insurance company sets this. But you can change your voluntary excess, and doing so could see your car insurance costs go down.

Bear in mind that a higher voluntary excess means that you're likely to pay more towards any future car insurance claims.

Enhance your car's security to make it harder to steal and lower your insurance costs. Adding car security features such as an alarm, immobiliser or tracker could lower your car's risk of theft.

Downsize your car as expensive cars with powerful engines are a bigger risk for car insurance companies. There's a greater risk of theft, and an accident could result in a higher repair bill. This translates into higher car insurance costs.

If you want to keep your costs down, consider getting a second-hand car with a less powerful engine.

Build your no-claims bonus. For each year you go without making a claim, you get another year added to your no-claims bonus (NCB). This usually grants you an insurance discount as a reward for several years' of safe driving. The more NCB you have, the bigger the discount you could get.

When will I start paying for no deposit car insurance?

As is the case with all car insurance policies, you start paying for your policy straight away.

No deposit car insurance means that your insurer breaks your costs down into 12 monthly payments. Most of these payments should be the same amount, and the initial payment tends to be a little different.

The insurance company sets its own payment schedule, so you may find this first month's payment to be a little higher than the other 11 payments. When you compare car insurance quotes with us, we'll show you a breakdown of how these payments look.

So long as you've made a payment - either for the first month or in full - you should be covered to drive your car.

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What information do I need for a no deposit car insurance quote?

You can compare car insurance quotes quickly with us. We'll compare 142 car insurance companies in minutes so you can find our best deals.

If you want to get your quote even faster, it helps to have some information to hand:

Vehicle information:

  • The make and model of your car
  • Your reg number
  • Your annual mileage
  • A list of any modifications your car has

Personal information:

  • Your driving licence number
  • A list of any claims or convictions for the past 5 years
  • Details of any named drivers you wish to add
  • Information about your occupation

What our car insurance expert says:

It's easy to be misled by the term 'no deposit car insurance', but that doesn't mean you can't find a great deal. Whether you're after monthly or yearly car insurance, it's always worth comparing deals to see what's out there. I highly recommend you take a few minutes to compare quotes, you might be able to save yourself some money.
Alex Kindred car insurance expert signature

Alex Kindred

Car insurance product manager

Need more help?

Can I get car insurance without making any upfront payment?

No, you must make a payment of some kind before your car insurance is active.

If you get behind the wheel before you start paying for your insurance, you risk driving without insurance. This could land with you a fine and points on your licence.

Can I get monthly car insurance with a poor credit rating?

Yes, you can still pay for your car insurance by direct debit, even with bad credit.

Some insurance providers might not offer you cover if you've got a poor credit history. Some might raise your insurance costs. It's worth comparing car insurance quotes to get a range of prices.

Car insurance companies tend to do credit checks when you buy a monthly policy. Since a monthly car insurance policy is effectively 'borrowing' from the insurer to pay for the policy, your credit score is taken into account.

Does the deposit cover my first month’s insurance?

If you're paying monthly, your 'deposit' is actually the first month's payment. So yes, making this initial payment covers your first month's insurance.

You need to make sure that you keep making the monthly payments to keep your car insurance cover active.

What is the average deposit for car insurance?

When you compare car insurance quotes with us, we can show you how the insurer sets its monthly payment schedule. You're likely to find that the initial payment for a monthly car insurance policy is around 20% of the total price.

Some insurance companies try to spread the cost of the policy as evenly as possible across all payments. Others make the initial payment a little larger.

When you compare policies, you should be able to see how your payments look before you buy. That should let you set your budget accordingly so there are no surprises later.

Why do I have to pay a month in advance for no deposit car insurance?

The monthly payments you make cover your car for the coming month. This is exactly the same as those who pay annually - you pay for your car insurance to cover you for the year ahead.

Without these payments in advance, insurance companies might risk not having enough cash to fulfil car insurance claims.

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