No Down Payment Car Insurance

Getting no down payment car insurance is appealing for many people, especially those on a tight budget. The idea of securing auto insurance without making a deposit sounds too good to be true, but is it? The reality is most auto insurance companies require a down payment. There are many reasons for needing an initial payment, including vetting quality, long term customers.

Insurers look at people that can't afford a deposit as more problematic. These customers are more likely to cancel their policy, miss payments, or commit insurance fraud.

Some car buyers look for a no down policy to legally buy their car from a dealer and quickly cancel the policy. Therefore, there are very few, if any, insurance companies that offer no down payment car insurance policies.

Why Are Down Payments Required?

The amount you pay for auto insurance is determined by the potential risk you pose. The people who pay the least for coverage pose the least risk. Conversely, those who are high-risk drivers pay much higher rates. This is also true with down payment requirements. If a driver has multiple reckless driving infractions or at-fault accidents, they will be required to put down a bigger deposit. Several factors determine rates, including:

• Vehicle Type
• Age of the Driver
• Zip Code
• Gender
• Driving Record 
• Credit
• Homeowner
• Marital Status

Auto insurance deposits also help pay for the onboarding costs related to new customers. These costs include obtaining a person driving record,  credit information, and other administrative expenses.

Allowing for no down payment car insurance would mean the insurer would have to pay for these costs. Thus losing money upfront and reducing the chance of making a profit on the policy. This is one of many reasons why almost no carriers offer these types of deals.

Very Cheap Car Insurance for $20 Down

Some companies provide low down payment policies that can get you covered without making a big financial commitment. Other insurers have more extensive deposit requirements, but your overall installment payments will be lower. To get very cheap car insurance for $20 down, it helps if you have good credit. You also want to have a history of consistent coverage. If you’ve had your policy canceled in the past, this raises a red flag.

It often means a severe violation raised the risk level substantially, causing the insurer to void the policy. There could be past reckless driving offenses or DUIs that caused the policy to be voided.

If a driver is required to file an SR22, then he or she will be required to make a more significant down payment, usually 15% or more of the total premium.

The good news is if you’re a safe driver with a good history of continual coverage, you can qualify for cheap car insurance with a low down payment.

Finding Low Down Payment Car Insurance Coverage

Numerous providers do not sell zero down auto insurance plans. One reason is the clients are often looking for short-term insurance. This means they are likely to cancel the policy or switch to another company after getting insured. If a company insurers someone with the first month free, they need to get that money back through future premium payments.

If someone cancels the policy after 1 or 2 months, then the carrier will not make any money on that policy. In short, it’s just not good business for most providers. If the client switches after a brief time, the insurer will lose money and incur increased risks from now on.

This makes low down payment policies riskier for car insurance companies, so many choose not to sell these types of policies. When a company offers coverage with the first month free, they are taking a significant risk and will likely lose money for the first few months.

Average Car Insurance Costs

According to the popular comparison site The Zebra, the average annual cost of insuring a vehicle in the United States is about $713.

This is only a rough estimate. There are so many factors that go into rates. The more expensive your automobile is, the higher it will cost to insure it. It would be best if you also kept in mind that people who live in highly congested areas, like big cities, will pay more to get their car insured. Amazingly, there are many more auto accidents in Las Vegas, for example, than people living in rural Kansas.

The Coverage You Select Affects the Down Payment Cost

If you search for monthly auto insurance with the first month free, you should carefully select the coverage and limit amounts. In general, the more protection you need, the higher your premiums will be. This will result in a larger down-payment requirement.

Liability is the cheapest car insurance you can buy and is mandatory in all but one U.S. state. Customers can purchase a basic plan with state minimums for as low as $29 per month. If your automobile is paid for and is more than six years old, consider liability only to reduce the cost of covering your car.

If you add more generous amounts of coverage, including collision and comprehensive, the premiums will go up. This will also increase your deposit amount required. Some companies may still offer a comprehensive coverage plan with high limits for low down payments for those with excellent credit and a long track record of being insured. In this case, it’s about attracting long-term customers that will hopefully stay insured with the same company for years to come.

Is a Low Down Payment Policy More Expensive?

The short answer to that is yes, but not too much.

On average, these types of policies only cost about 5% - 10% more. For those consumers strapped for cash and desperate to get their car insured, it might be worth it.

To illustrate this clearly, let’s say a typical policy might cost $1,140 per year if paid in full. The same auto insurance plan with a low down payment of $40  and the first month free might cost $1,225 per year, an additional cost of less than $10 per month. If you cannot pay the premiums in full, then monthly payments can help you cover the cost of insuring your vehicle.

States that Offer Very Cheap Auto Insurance Deposits

Some of the most populous states, including California, New York, and Florida, allow insurers to offer coverage with very low down payments.

These include:

• Washington
• California
• Arizona 
• Oklahoma
• New York
• Georgia
• Florida

Auto Insurers that Offer Low Down Payment Deals

Several regional and national carriers can get you covered with a small deposit.

• State Farm
• Farmers
• Progressive
• Allstate
• Safe Auto
• Kemper
• Nationwide

How to Buy Car Insurance With a Low Down Payment

If you need the best low down payment car insurance deal, then shop online. Direct insurers have online rates that are cheaper than most local agents or brokers. Comparison sites like Direct Auto Insurance are a great place to start. You can search for the coverage and down payment plans that fit your budget. Get started now with a free rate quote by entering your zip code.