Guide to No-Down-Payment Car Insurance

No-deposit car insurance isn’t a thing, but you can still save on your insurance costs by finding the right company. They might offer you discounts, which can help keep your upfront payment low.

You won’t find car insurance that doesn’t require any money upfront because insurance companies need some payment assurance before they cover you. Your initial payment, often called a deposit, is usually included in your monthly premiums. If you’re one of the 60% of people visiting this page searching for insurance with the smallest possible upfront cost, keep reading. We’ll explain why these deposits are necessary, how you can reduce your initial payment, and which car insurance companies are great for drivers wanting lower upfront fees.

Key takeaways

  • Car insurance with no down payment doesn’t exist.
  • Your initial payment, sometimes called a “down payment” or “deposit,” is the first part of your total premium. It’s often a bit higher to cover the initial setup costs for the insurer.
  • The less expensive your policy, the smaller your initial payment will be.
  • We advise against using pay-as-you-go insurance because it can lead to gaps in your coverage. These gaps can result in significant financial and legal problems.

Reducing Your Initial Insurance Cost

Reducing Your Initial Insurance Cost

Cut your overall insurance cost

Typically, your initial payment for car insurance is just the first month’s payment. So, having a “low deposit” car insurance depends on having an affordable insurance rate. To achieve this, consider being cautious when making claims, avoid unnecessary coverage, and ask about available discounts.

Check if your insurer offers options

Some companies provide choices, letting you pay for either the first 30 days or 45 days as your initial payment. If they ask for the first 45 days, you can ask about a 30-day alternative. Keep in mind, a higher upfront payment will mean lower monthly installments, as it covers a larger portion of your total premium when you start your policy.

Be careful when picking your payment method.

Auto insurance companies might add extra charges for certain payment plans or methods. To avoid these fees, ask your insurance provider about payment options that don’t come with extra costs. For instance, setting up an automatic Electronic Funds Transfer is a common way to reduce or completely eliminate these service fees.

Compare car insurance quotes.

As mentioned earlier, having a lower car insurance rate often leads to a smaller initial payment. One of the simplest ways to find affordable insurance is to gather quotes from multiple companies.

Avoiding Pay-As-You-Go Car Insurance Options

Pay-as-you-go car insurance might seem like a good idea for those looking for no-deposit car insurance, especially if you don’t drive much. However, we generally don’t recommend it. This type of insurance can leave you exposed to gaps in coverage, or even worse, a complete lack of coverage.

For instance, if something happens to your parked car while your insurance is turned off, it probably won’t be protected. Plus, there’s a risk that you might forget to activate your insurance before driving, which could lead to serious legal and financial problems if you’re in an accident.

It’s important to know that if your insurance is “turned off” for seven or more days, insurers are obligated to inform the DMV. This can result in your registration being suspended and your insurance rates going up.

Why Insurers Ask for Down Payments

While a quick online search may suggest options for car insurance with no deposit, the reality is that this isn’t a genuine choice. This relates to how auto insurance works. Car insurance, like any other type of insurance, is all about assessing and preparing for risk. Insurance companies prefer customers who represent the lowest financial risk.

Why Insurers Ask for Down Payments

From an insurance company’s perspective, a driver who can’t make a down payment may be seen as someone who is primarily getting insurance just to drive a newly purchased vehicle or meet registration requirements. These individuals might only be interested in immediate insurance to avoid penalties or meet a car dealership’s demands. This type of customer raises concerns for insurance companies, as they could potentially end up costing more in the long run.

Moreover, insurers might worry that such customers might cancel their policy shortly after obtaining it, which presents a significant risk. In certain states, there are regulations that require insurers to report when a registered driver cancels their policy for any reason, which can lead to complications down the road.

Typical Costs of Car Insurance Down Payments

It’s crucial to understand that a down payment isn’t an extra cost – it’s included in your overall rate. This means whatever you pay upfront as a down payment will be subtracted from your future monthly payments. Some insurance companies may ask for 30 to 45 days of premiums to activate your insurance policy.

Down Payment AmountMonthly Installments
10% or $60$108 monthly premium
20% or $120$96 monthly premium
30% or $180$84 monthly premium

The more money you put down at the start, the lower your monthly premium will be. Your down payment isn’t an extra cost or a deposit – it’s part of your ongoing premium.

The specific amount you’ll need for your down payment can vary depending on your payment plan, so it’s challenging to give an exact figure. Some car insurance companies offer a range of options for your down payment amount.

Tips to Save on Auto Insurance

Tips to Save on Auto Insurance - No Down Payment Insurance

Even if you recognize the importance of paying a down payment, it can still be tough on your finances. Remember, seeking the “cheapest” car insurance doesn’t always mean it’s the best choice for you. Your goal should be to find the best coverage that offers great value. Additionally, if you’re financing your vehicle, your lender might insist on physical damage coverage, which can result in higher rates. That said, let’s explore other ways to save on car insurance, starting with the most budget-friendly car insurance companies.

1. Shop for the Best Rates

It’s not easy to give you an exact car insurance quote without knowing your personal information. However, when we kept all other factors the same, we found that USAA offers the most affordable car insurance, whether you need full coverage or just the minimum liability coverage. Please keep in mind that USAA serves members of the military and their families exclusively.

We want to stress that we, at Insurance Top List, don’t recommend getting only the absolute minimum liability coverage because it leaves you exposed to potential losses. Opting for higher coverage limits provides better protection.

Full Coverage Car Insurance Rates

CompanyAvg. 6 Mo. PremiumAvg. Monthly PremiumRank
State Farm$785$1314

Liability-Only Car Insurance Rates

CompanyAvg. 6 Mo. PremiumAvg. Monthly Premium
State Farm$291$49

Data updated on Oct 2023:

Methodology: The auto insurance rates shown above and on this page are dynamic. This means the data will update when the latest information becomes available. These rates are based on a sample driver profile, which represents a 30-year-old single male driver with a Honda Accord and full coverage. This profile was adjusted using common factors that major car insurance companies consider, such as age, coverage level, driving history, and others.

2. Be Smart About Filing Claims

The saying “use it or lose it” doesn’t really apply to car insurance. In fact, the less you use your auto insurance policy, the cheaper it becomes. This happens because car insurance companies adjust your premiums after you make a claim. The increase in cost depends on the claim’s value, your location, and your insurance provider. Below, you can see the average total premium costs over a three-year period.

That’s why it’s often a smart move to pay for minor claims yourself to avoid significant rate hikes. However, there are situations when you do need to use your car insurance. For example, if you’re at fault in an accident, you must file a police report and provide proof of coverage. This is required, and it can protect you from unfounded claims.

Another reason to use your insurance might be if the damage is more costly than the increase in your premium.


Increase at 6 MonthsIncrease at 12 MonthsIncrease at 3 Years

The information above reflects the total extra cost in car insurance premiums over a three-year period. This is the typical duration during which most insurance companies will apply penalties for various violations and accidents where you’re at fault.

3. Pick the Right Coverage for Your Needs

Review your car insurance as your vehicle gets older. Over time, you might find yourself paying for insurance coverage that isn’t really necessary for the age and value of your car. Here’s a simple rule of thumb for car insurance: if your vehicle is valued at less than $4,000, you likely don’t need collision and comprehensive coverage, also called physical coverage.

These types of coverage are meant to protect your vehicle, but if your car isn’t worth much, you could be paying for insurance that you don’t actually need. This is one of the reasons why about 33% of our customers choose to have only the legally required liability coverage.

CoverageAvg. 6 Mo. PremiumAvg. Monthly Premium
State Minimum Liability Only$298$50
50/100/50 BI/PD with $1,000 Deductible$777$129
50/100/50 BI/PD with $500 Deductible$880$147
Updated: Oct 2023  

On average, nearly half of your premium goes toward physical coverage. But if your vehicle’s value is over $4,000, you might want to think about increasing your deductibles. By doing this, you can actually lower your car insurance rates. If full coverage seems too expensive, consider getting comprehensive coverage, also known as other-than-collision coverage. It’s often more affordable than collision coverage and provides protection against things like fire, floods, theft, and collisions with animals.

4. Look for Insurance Discounts

Most insurance companies offer similar discounts, and they often include them in your policy automatically. However, just to be sure, here are some common discounts you can qualify for. While each one might not save you a lot of money individually, they can add up and help you reduce your annual premium.

Here are some standard discounts to look out for:

  • Good driver discount
  • Student discount
  • Paperless discount
  • Multi-policy discount
  • Paying by bank account
  • Paid in full discount
  • Multi-vehicle discount
  • Telematics programs
  • In-vehicle safety devices

Wrapping Up

Standard car insurance companies don’t typically promote “no deposit auto insurance.” To insurance providers, policies with zero down payments appear risky and tend to attract high-risk drivers. However, there are alternative ways to save on insurance. While avoiding claims and selecting the right coverage for your vehicle are good starting points, the most effective way to find affordable car insurance is by exploring as many options as possible.

No-Down-Payment Insurance: FAQs

Can you find very affordable car insurance without making a down payment?

It’s highly unlikely. Most car insurance plans require an upfront payment, even if it’s just for the first month’s premium. Insurance companies view those who can’t make a down payment as individuals seeking short-term insurance for registration or dealership obligations. Insurers are wary of such customers as they could end up costing more in the long run and pose a higher risk of policy cancellation.

What exactly is a down payment for car insurance?

A down payment for car insurance is the initial payment you make for your policy. It’s not an extra charge; this payment is included in your overall rate. So, the amount you pay upfront as a down payment is subtracted from your future monthly premiums.

Which car insurance companies don’t demand a down payment?

Non-standard insurance companies are more likely to offer policies with no upfront payment, but it’s not guaranteed. Insurers see people who can’t or won’t pay a down payment as risky to insure. Non-standard insurers specialize in covering high-risk drivers and may be more flexible with customers who can’t make a large upfront payment.

Is an insurance down payment the same as a deposit?

While an insurance down payment is sometimes referred to as a “deposit,” customers typically won’t receive a refund as it’s applied to the overall premium.

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