Chelsey Tucker graduated with a Bachelor of History degree from Metropolitan State University in 2019. She now writes about insurance with her specialty being life insurance and has been quoted on Help Smart Phone and MEL Magazine.

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Dan Walker graduated with a BS in Administrative Management in 2005 and has been working in his family’s insurance agency, FCI Agency, for 15 years. He is licensed as an agent to write property and casualty insurance, including home, auto, umbrella, and dwelling fire insurance. He’s also been featured on sites like Reviews.com.

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Reviewed by Daniel Walker
Licensed Auto Insurance Agent Daniel Walker

UPDATED: Mar 8, 2022

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The Lowdown

  • Auto insurance companies typically charge an initial deposit when you pay your rates monthly
  • Some auto insurance companies advertise no deposit car insurance, which is not an entirely accurate name
  • Even though up-front, out-of-pocket costs are minimized, no-deposit car insurance is more expensive long term

Car insurance is a necessary expense that most drivers would love to minimize. Depending on your age, gender, and driving history, your quoted rates for auto insurance could be relatively high. You may have seen very cheap car insurance with no deposit advertised, but buyer beware. Not only is no-deposit car insurance a misnomer, but this payment structure can end up costing you hundreds of dollars more long term. If you are looking to find the best deal on car insurance, it is essential to explore your options.

Which very cheap car insurance requires no deposit?

So you just got a new set of wheels, and you’re excited to go for a drive. Of course, you need insurance first, but you just spent your savings on a new car. When shopping for a car insurance policy, you may have discovered a few companies that advertise very cheap car insurance with no deposit. Is this type of car insurance policy really all it’s cracked up to be?

Many people struggle to come up with the funds to pay for a car insurance policy upfront. Some impatient drivers are tempted by instant auto insurance, no down payment required, dirt cheap policies. Are these buy now, pay later car insurance policies legit? Will you actually save money with no down payment car insurance when it comes to brass tacks?

The truth is no down payment car insurance doesn’t exist. This title is mostly a marketing strategy for car insurance policies that you can pay monthly instead of annually. It is impossible to start a car insurance policy without paying for the first month. No deposit car insurance policies require some amount of money upfront.

Car insurance policies advertised as no deposit are only allowed in select states. This limited availability can significantly limit your opportunity to take out a no-deposit car insurance policy, depending on your location.

States That Allow No Deposit Car Insurance

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

If your state isn’t listed, don’t fret. Actual no-deposit car insurance might be borderline fictitious and not widely available, but monthly payment options exist for most people.

Leading auto insurance companies allow some drivers to pay their car insurance rates monthly instead of the whole year upfront. These policies still require a deposit which can be upwards of 20% of the annual rate. Some auto insurance companies allow you to pay a small deposit, sometimes as low as a $20 down payment.

For an example of the low deposit monthly rates for liability-only insurance for a 30-year-old male driver in New York City with a 2015 Ford Taurus and clean driving record, take a look at these top auto insurance companies:

  • Progressive – $160
  • GEICO – $71
  • State Farm – $58
  • USAA – $35

If you can take out a car insurance policy with no deposit, you will likely spend more money on your rates. As previously mentioned, no deposit car insurance doesn’t genuinely exist.

Companies redistribute the initial deposit into the monthly payments for car insurance policies advertised as no deposit. Interest and fees are also rolled into the monthly rates, so you end up spending more with this payment structure when it’s all added up.

For example, suppose you get a quote for a car insurance policy across both payment structures. Basic math can help show you the difference in cost. Let’s say a hypothetical auto insurance company offers liability-only car insurance quoted at $1,000 annually. If you want to pay monthly, they require a 20% down deposit equaling $200.

Upon exploring your options further, you discover that they offer a no-deposit payment structure. You are quoted $95 a month for a no-deposit payment plan. In effect, this means the $200 deposit is included in the monthly payments along with interest and fees.

Comparing Costs for No Deposit Car Insurance

Cost Paid In Full Deposit No Deposit
Upfront $1,000 $200 $0
Monthly $0 $67 $95
Total $1,000 $1,004 $1,140

Over the course of your insured year, you will end up spending $140 more than if you had gone with paying the annual rate upfront or the $200 deposit.

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Can you get the first month free for car insurance?

If you’re struggling with bills but you know you’ll have the funds soon, then you might be wondering why you can’t find car insurance with the first month free. There is a good reason why auto insurance companies do not offer the first month free.

Primarily, you are not insured unless you’ve actually invested money into your policy. If auto insurance companies offer the first month free, some drivers will undoubtedly take advantage of this.

Sometimes drivers will purchase an auto insurance policy to prove compliance with the government or the lessor of their vehicle. Once they have the paperwork to prove they have insurance, they often stop paying their rates.

This type of behavior is a liability for the insurance company, so they have measures to protect against it. If the insured must cough up a sizable chunk of change to start the policy, they are less likely to abandon it. Even if they do default on their policy, the insurance company has already collected a portion of the rates.

Tips for Finding Dirt Cheap Car Insurance

Car insurance is an expensive but necessary part of life. You may feel disheartened to learn that very cheap car insurance with no deposit doesn’t truly exist. Don’t feel too discouraged, though, because there are other ways to save money on your car insurance rates.

Top auto insurance companies offer promotions like the following:

  • Safe driver discounts. Safe driver discounts rely on black box technology, also known as telematics devices, to monitor your driving behavior. If you are able to prove to the auto insurance company that you are a safe driver, they discount your rates as a reward.
  • Good student discounts. Good student discounts are a boon for new drivers. Younger drivers can save money on their car insurance rates by performing well in school. This promotion is a great incentive to buckle down and study. The long-term financial rewards can help keep rates low if you stay with the same auto insurance company.
  • Bundle and save deals. Top car insurance companies offer promotions to save money if you bundle your car insurance with other insurance. Bundle options include, but are not limited to, home, renters, RV, and boat insurance.

As you can see, there are ways you can save money and get dirt cheap car insurance depending on your location and situation. The most critical money-saving tip for any insurance is thoroughly exploring your options. That’s why comparing car insurance quotes can save you hundreds of dollars.

Is buy now, pay later car insurance the right option for you?

You may have recently seen very cheap car insurance with no deposit advertised. Like many insurance shoppers, you may be wondering if it’s too good to be true. The hard truth is that instant car insurance with no deposit doesn’t exist. A monthly payment structure can be more accessible for individuals who cannot afford a larger upfront payment. Unfortunately, however, it does cost substantially more in the long run.