No deposit car insurance

Overcome the high initial costs with no deposit car insurance

The cost of running a car is high - petrol prices are rising and the average motor insurance premium are not exactly a work over either. Of course, some motorists can pay a lot more for car insurance, with premiums topping £1,000 or even more in what are perceived to be high-risk cases.

Spread the cost of car cover 

Car insurance can take a big chunk out of the household budget and many families simply cannot afford to pay for car cover up front.  After all, how many of us have a few hundred pounds sitting in our bank account? However, you can make the expense more manageable by spreading the cost over the year in monthly instalments.

For example, instead of paying £420 at the start of the policy term, you could pay in monthly instalments of £35. Paying by instalments can also allow you to buy a higher level of cover than you could otherwise afford. 

Charges for instalments plans

Most insurers offer an instalment plan, though they will charge for the convenience. Prices vary so it's important to check out the different fees and rates of interest to get the best car insurance deal. But remember it will almost always work out more expensive to pay monthly rather than annually.  So if you can possibly afford it, it's usually better to pay for car insurance with a lump sum.

Let's say a company quotes an annual premium of £380. If you choose to pay the cost in monthly instalments, the insurer might ask for 11 monthly instalments of £38, bring the total to £418 - about £40 more than the upfront cost. 

No deposit car insurance 

There is another potential problem with monthly payments: motorists who opt for an instalment plan usually have to put down a deposit of about 20%, though some firms insist on a larger amount. Motorists who are strapped for cash can sometimes struggle to get a deposit together, especially if their motor insurance premium is unusually high. If, for instance, your premium is £1,000, you could be expected to put down a £200 deposit.

Thankfully a number of firms are listening to the demands of customers - and trying to win business in a competitive market - by offering no deposit car insurance.  It works in exactly the same way as standard instalment plans, except that you don't have to scrape together the money for a deposit, which can be a financial lifeline in these difficult times.

The costs are usually the same as for car insurance with a deposit as most insurers stick with the same interest rates and fees. But, as always, it pays to shop around.

†82% of shoppers obtained a quote in 5 minutes or less. Source eDigitalResearch December 2012.