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No deposit car insurance sounds good, but in reality, it’s just a marketing trick that leaves you no better off.
Lots of companies will try to reel you in with promises of no deposit car insurance, but you should be extremely cautious about these offers. They won’t deliver what they promise and may lead to unexpected payments. Some offers could even be scams.
Legitimate options to spread out the cost of your car insurance do exist, making payments more manageable – this guide will look at those.
No, there are no options for car insurance without a deposit. No deposit car insurance is a way some insurance companies advertise their cover to make it seem like you don’t have to pay any money upfront.
But the fact is, even with so-called no deposit deals, you’ll have to make a payment towards your car insurance before you’re covered and legally allowed to drive.
No deposit car insurance offers are actually a way of spreading the cost of your car insurance over a year. This way, you pay in 12 monthly instalments instead of one lump sum. Most car insurers will give you the option to pay either way.
Paying in monthly instalments is usually more expensive overall because insurance companies typically charge interest on top of the monthly fee. Paying the full cost of the policy upfront often comes with a discount.
You’ll usually have to pay around 20 per cent more for the first instalment if you pay monthly, with the rest split equally across 10 or 11 further monthly payments. No deposit car insurance just reduces this first higher payment and spreads the full cost of the policy equally across 12 monthly payments – that’s it.
There are many car insurance companies offering no deposit insurance online, which can make it seem like you get a valid policy without needing to pay anything upfront – but that’s not the case.
No deposit car insurance deals still require you to make a payment before you’re legally insured to drive. This payment will be due days after you sign up – it just won’t be any higher than the other monthly instalments.
So if you choose a deal that’s advertised as car insurance with no deposit, be aware that money will still come out of your account shortly to pay for the first month’s instalment.
Low deposit car insurance is in high demand as the cost of car insurance continues to climb – especially for young drivers, who nearly always pay more for cover.
The annual cost of car insurance for young drivers has surged by an average of £594 (50 per cent) in the past year, according to Comparethemarket’s research in September 2023.
Car insurance premiums for motorists aged under 24 now reach up to £1,792 per year as of August 2023, compared to £1,198 in the same period last year.
But drivers of all ages are facing higher insurance costs – and everyone can benefit from low deposit insurance if they use some simple tactics.
| Ways to get low deposit car insurance | How it works |
|---|---|
| Defer your first month’s payment | Typically, you can only defer the first payment if you’re renewing cover with your car insurer. If a car insurer deems you eligible, you can defer your first monthly payment, and that payment will be spread over the remaining months of your insurance policy. The overall premium for the term of the policy won’t change, but your future payments will increase. |
| Pay using a 0 per cent interest credit card | Pay for your car insurance policy in full and upfront on a 0 per cent interest credit card if your car insurance company allows this payment method. This way, you’ll get the discount for paying in full and avoid the higher first month payment and interest applied to monthly payments. Then, pay off the credit card charge in manageable monthly instalments before the 0 per cent interest period expires. |
| Pay monthly | Most insurers will let you pay for your car insurance policy in monthly instalments spread over 12 months. Insurers don’t usually do this for free though – they add interest to the monthly payments, so you’ll probably end up paying more by choosing this route. You’ll need to pass a credit check and set up direct debit payments, and if you miss any payments, it will negatively affect your credit rating. |
| Increase your voluntary excess | You can lower the overall cost of your car insurance by choosing a policy with a higher voluntary excess (the amount you agree to pay before any claim payout kicks in). The more voluntary excess you agree to pay, the cheaper your insurance will be. |
| Improve your car’s security | Choosing a car with an immobiliser or getting one fitted can lower the overall cost of your insurance because it makes your car harder to steal, so insurance companies consider you a lower risk. Storing your car in a garage has little impact on the cost of your car insurance, despite what many people think. |
| Get a telematics (black box) policy | Telematics car insurance, also known as black box car insurance, is often cheaper than a regular policy because it encourages safer driving, making you less of a risk to insurance companies. When you sign up, you agree to drive according to certain safe driving rules. A device is fitted to your car to monitor your driving. If you break the rules, the insurance company could void your policy. |
| Consider temporary car insurance | If you don’t have the money to pay upfront for your car insurance but want to avoid monthly instalments, you could consider temporary car insurance for a short period until you have funds available for an annual policy. Temporary car insurance will cover you from 1 hour to 30 days. With the RAC, for example, prices start at £18.48 for one hour, £30.26 for one day and £92.86 for one week. |
| Build up a no claims bonus | A no claims bonus, or no claims discount, lowers the cost of your insurance policy after a certain period in which you haven’t made a claim. They vary from insurer to insurer, but a no claims discount can be as much as 30 per cent for one claim-free year and 60 per cent for five claim-free years. Some insurers offer protected discount policies. These allow you to make a certain number of claims over a specified period without affecting your no claims discount. |
| Shop around | Comparison websites make it easy to compare car insurance policies from hundreds of companies in one place to find low deposit car insurance. They’ll also let you compare the difference in cost between paying for your policy upfront or in monthly instalments. You can also compare higher and lower excess policies to bring down the cost. |
Trying your hardest to get a low deposit car insurance deal can make good financial sense – but beware the pitfalls.
According to research by Confused.com conducted in spring of 2023, insurers charge 16 per cent more on average when you choose to pay monthly. This means for a policy costing £776 per year, you’d pay an extra £124.
Comparethemarket made a similar finding around the same time, seeing drivers pay 10 per cent more for paying monthly.
The comparison website found the average car insurance policy was £623 for drivers who paid the total amount upfront. But the same policy was £65 a year higher when spread across monthly instalments.
Car insurance companies say they charge more to pay monthly because it involves taking out a loan to cover the cost, which drivers repay with interest over the course of the year.
You could also be charged up to 20 per cent of the annual premium for the first month’s instalment if you choose to pay monthly. Your remaining instalments will be smaller, but you’ll still end up paying more overall because of the monthly payment penalty.
Paying for your car insurance with an interest-free credit card can be a good way to get the discount most insurers would apply to your policy for paying it upfront.
But remember, 0 per cent interest credit cards are only interest free for a limited time. You’ll want to put the costs of your car insurance on a card with a long enough interest-free period to give you time to pay it off.
If you don’t pay it off within that time, higher standard charges will come into effect on the amount you haven’t yet paid back. These can add 25 per cent or more in interest on top of what you still owe.
Also, if you miss a minimum repayment on your 0 per cent interest card, you could lose the 0 per cent interest rate on everything you still owe on it.
Black box insurance is generally cheaper than regular car insurance – but only if you stick to the rules. The cheap insurance rates only apply to very safe drivers.
You mustn’t let anyone without insurance drive your car. The device fitted to your car will monitor your driving and record if you:
If you regularly break these rules, your insurance company will know. It may void your cover, meaning you’ll have to pay for a new car insurance policy.
If you choose to pay for your car insurance policy monthly, in most cases, the first instalment will be around 20 per cent higher. The insurer will then spread the cost of the rest of the policy across 10 or 11 months (to cover a whole year).
Some car insurance companies advertise no deposit car insurance, but this really means they’re agreeing to spread the cost of annual car insurance evenly across the 12 months instead of charging a larger instalment in the first month.
Maybe. Car insurance companies will want to do a credit check on you before letting you sign up for monthly payments. This is because you’re essentially signing up for a loan.
The higher your credit score, the lower the risk you are to an insurer. If you have a low credit score, you may not pass the check. This failure to pass will appear on your credit record and could make getting future credit more difficult, so think carefully before choosing this option.
You don’t need to pass a credit check to pay the full car insurance amount upfront. So if you have a poor credit rating and you already have an interest-free credit card, you could use it to pay the full amount. This is typically a better option (and you’ll benefit from the annual upfront payment discount).
