No-down-payment car insurance policies are rare, and even if you can find one, it will probably cost more in the long run than a policy with a down payment.
Car insurance can be expensive, especially if the company wants you to pay the premium for a six-month or one-year period up front in a lump sum. Some auto insurers will allow you to purchase a policy without making a down payment to cover the total premium for the term of the policy. It’s important to know that no-down-payment car insurance is the exception, not the rule. You should also understand what getting car insurance with no money down could mean for your overall budget.
We’ve researched the best auto insurance providers and looked at the coverage they offer, their rates, and customer reviews. We recommend getting several quotes before you make your decision. To get started, fill out the form below and see what’s available in your state.
In this article:
Why Do Auto Insurance Companies Usually Require Down Payments?
A customer who wants to avoid making a down payment often raises a red flag for auto insurers. A company may think the person only wants to get insurance to renew a vehicle’s registration or to complete a vehicle purchase, and the insurer may be concerned that the individual will turn around and cancel the policy soon after obtaining proof of coverage.
A customer who buys car insurance and doesn’t intend to keep it isn’t a customer an insurance company wants. An insurer must spend money to obtain a prospective customer’s driving record (and, in many cases, a credit report) and to pay its employees to process the application. The company will be out the money if it doesn’t receive a down payment and then the customer cancels the policy. Since insurance companies want long-term customers, many require all customers to make an initial payment.
A down payment is not an extra fee added onto the premium – it’s included in the total cost of insurance. The amount of the down payment is deducted from the overall six-month or annual premium. A down payment makes the subsequent monthly payments lower than they would have been without a down payment. Different insurance companies require different down payment amounts, and some allow customers to choose the size of their down payment.
Insurance companies often give customers who pay the entire premium up front a significant break on the total cost of coverage. The amount of the reduction depends on many factors, such as:
- Type of vehicle insured
- Length of the policy
- Driver’s zip code and driving record
- Customer’s credit history.
What Is A No-Down-Payment Car Insurance Policy?
If you purchase a policy from an auto insurance company that does not require a down payment, that doesn’t mean you will get coverage without paying any money initially. It means you will only have to pay the first month’s premium, not the entire premium, when you buy a policy. That may save you money now, but you will pay more in the long run.
Is Getting A No-Down-Payment Policy Even Possible For You?
Insurance companies offer a variety of payment options, but not all plans are available to all customers. For example, an insurer may allow the owner of an older and inexpensive vehicle to buy insurance with no down payment, but it may not extend that offer to the owner of a newer, more expensive car that is riskier to insure. If you have a spotty credit history or must file an SR-22, you may have a hard time finding auto insurance coverage from a company that doesn’t require a down payment.
Where you live is also important. No-money-down car insurance is only available in a limited number of states, including Arizona, California, Florida, Georgia, New York, Oklahoma, and Washington.
How Do Car Insurance Companies Determine Rates?
An auto insurer will look at many factors to set your premiums. The type of car you have is one of the most important criteria the company will take into account. A newer car may be more likely to be stolen, although thieves also target some common, less expensive vehicles since it’s easy to break them down and sell off the parts. Safety results for specific makes and models can affect rates since some vehicles are more likely to be involved in accidents or cost more to repair than others.
An auto insurer will look at several personal factors. For example, where you live can have a significant impact on your insurance premiums because accidents and vehicle theft are more common in some zip codes than others.
Your age and gender can affect your insurance rates since studies have found that those factors can influence a driver’s likelihood of getting into an accident. For example, adults tend to be safer drivers than teenagers. Rates go down as men and women get older, then premiums increase for senior citizens. Customers who belong to groups that are regarded as less risky drivers are often quoted lower rates than others.
The more often you drive, and the farther you travel, the higher your chance of being involved in an accident. If you don’t drive much, you may be charged significantly lower insurance premiums than someone who lives in your area and who drives an identical car more often than you do.
In most states, insurance companies take a person’s credit history into account when setting premiums. Credit can’t be considered when setting auto insurance rates in California, Massachusetts, or Hawaii.
Do I Qualify For A Car Insurance Discount?
Insurance companies offer several types of discounts to help customers save money. You may save a bundle on car insurance if you qualify for a discount for one or more of these reasons:
- Having a safe driving record (no accidents within a period of time)
- Being a good student
- Operating a vehicle equipped with safety features
- Insuring more than one vehicle with the same company
- Purchasing multiple policies, such as auto, homeowners/renters, and life insurance, through the same company (bundling)
- Being a current member of the military or a veteran
- Belonging to certain professional groups or affiliated organizations
- Using auto-pay
- Receiving electronic statements
Since rates are based on so many factors, no insurance company is the cheapest across the board. A company that offers low rates to someone in another state may charge a lot more where you live. A friend who lives down the street may have an inexpensive policy, but you may get a much higher quote if you have a poor driving record or a low credit score, if you drive a newer or more expensive vehicle, or if you don’t qualify for the same discounts your friend does.
The only way to find out which company is the best fit for your budget is to compare car insurance quotes from several insurers and to get specific figures that apply to you and your vehicle.
Don’t Make Costly Mistakes If You Can’t Afford Car Insurance
If you can’t cover the cost of auto insurance, don’t drive while uninsured. If you cause an accident while driving without insurance, you can be held responsible for repairs to the other driver’s car, plus medical bills and legal fees.
If you stop paying your car insurance premiums, your policy will lapse. That can lead to problems even if you don’t get involved in an accident. For starters, your driver’s license and/or vehicle registration can be suspended, and you may have to file an SR-22. If your financial situation improves and you want to buy a car insurance policy later, you may be denied coverage or be charged higher rates because you let your previous policy lapse.
How To Find Affordable Car Insurance
Talk to an insurance representative about the types of coverage you need, the amount of coverage you should choose, and possible changes you could make to your current policy to save money. For example, if you have an older vehicle that isn’t worth much, it probably doesn’t make sense to pay for collision and comprehensive coverage. If you lease your car or have an outstanding auto loan, however, you may be required to maintain collision and comprehensive coverage until the lease term ends or the loan is paid off.
Raising your deductible, or the amount of money you need to pay out of pocket before the insurance company will provide funds to settle a claim, may reduce your premiums quite a bit. When a customer assumes more of the financial responsibility for any claims that might be filed, that reduces the risk shouldered by the insurance company. If you’re a good driver who rarely files claims, you may save a lot more through lower premiums than the amount of the increase in your deductible.
In most cases, filing a claim will raise your rates, and the increased premiums may continue for several years. Driving safely and responsibly can reduce your likelihood of getting into an accident and having to use your insurance, which can keep your premiums down.
If you live in a state where your credit score can influence your car insurance premiums, focus on paying your bills on time. That can raise your credit score, which can help you get lower insurance premiums and can also make it easier to qualify for a mortgage, personal loan, or credit card.
Last of all, it’s a good idea to compare auto insurance quotes from multiple insurers. To get started, fill out the easy form below.
Auto Insurance Companies Worth Considering
We’ve researched many top-rated car insurance companies, and these are a handful that ranked highest in terms of customer service, affordability, and coverage. You can read more about these and other insurers in our review of the best car insurance companies for 2020.
USAA
If you or a member of your family is a current or former member of the military, check out USAA. It received AM Best’s highest possible rating, A++, and ranks highly in J.D. Power’s 2019 U.S. Auto Claims Satisfaction Study. In many states, USAA offers lower rates than any of its competitors.
GEICO
Based on our research, we consider GEICO the best car insurance company overall. It offers a variety of discounts and competitive rates. GEICO placed fourth in J.D. Power’s 2019 U.S. Auto Claims Satisfaction Study and earned an A++ rating from AM Best, and an A+ rating from the Better Business Bureau.
State Farm
State Farm, the largest auto insurer in the U.S., ranked fifth in J.D. Power’s 2019 U.S. Auto Claims Satisfaction Study. State Farm offers several apps to help consumers manage their policies and submit claims. Customers can also use an app to track their driving habits and another to complete driving courses that can help them qualify for discounts.
AAA
If you already have a roadside assistance membership through AAA, you may be able to get affordable car insurance, as well. Several companies fall under the AAA auto insurance umbrella. Coverage isn’t offered everywhere, but where it is an option, many customers, especially those with good driving records, get competitive rates. Several discounts are available, including ones typically offered by other insurance companies, as well as one for having a vehicle safety inspection conducted and another for using AAA’s mobile app.
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