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Cheap car insurance with no deposit

Can you buy car insurance with monthly repayments and no large upfront deposit? It's possible; but, to get the cheapest deals, you realistically need to spend some time, preferably about an hour, comparing quotations online, from multiple sources. However you could potentially save a great deal of money so it should be an hour well spent. After looking at many thousands of price comparisons, we have prepared this guide to help you find not only the lowest cost policy, but also one which doesn't leave you short of cover, and which is issued by a reputable insurer who will treat you fairly and honestly. Here are a few facts that should help you in your search.

Does no deposit car insurance exist?

Under UK and European laws an insurance contract needs at least a small payment in advance to make it legally enforceable. So, no matter what certain other sites may claim, it simply isn't possible to buy insurance without putting down at least a small sum. It is possible, however, to find schemes with just a low upfront payment required, and the balance repayable over a period of up to a year.  It is usual to make this initial payment by credit card, with the rest by a standing order. Some drivers raise the deposit (or even the full premium) by using a credit card with an interest-free period; you can apply for one at confused.com, moneysupermarket.com, gocompare.com etc.

Do Monthly payments involve additional charges?

By paying month to month, you are entering into a financial agreement. Sometimes the premium is advanced by a specialist finance company, and sometimes by the insurers themselves. Before putting up the money, the company will usually do a credit check - they are authorised to do this because it is almost invariable included in the 'terms and conditions' that you have to accept before you get a quote, whether this is via a price comparison site or the company's own web site.

Interest and charges are then added to the premium. In 2017 this is generally accepted to be roughly 11% of the premium, although this can vary according to the company and the credit rating of the applicant. This is a flat rate, which should not be mistaken for an APR (annual percentage rate) because the charge is based on the whole of the initial sum, whilst an APR is only charged on the sum outstanding at the time, which falls gradually as payments are made. A flat rate of 11% is roughly equivalent to an APR of 19.7%.

This means that if you can borrow the premium at a lower APR than this, you are likely to save money, provided that you keep up the agreed payments. You may also have more choice over the policy you take out, which might lead to more savings - more about this below.

Different insurers have different repayment terms

When we last checked in March 2017 we could still find a few insurance companies that were willing to accept a payment of a twelfth of the total premium as the initial deposit. The majority however, were insisting on about 10%, 20% or more, and some were not offering credit terms at all. Unfortunately some of these credit-shy companies were offering the lowest premiums. This meant that motorists could be forced to not only pay additional charges, but also accept a higher premium, for the privilige of paying over a year instead of in one advance payment.

It is sometimes better to approach a broker, rather than a price comparison service

It can be very quick and convenient to fill in one form online, and receive multiple quotes in return, and for the majority of drivers this can be a way to find the lowest available prices. However, there are a large number of drivers who cannot do this. Those with out-of-the-norm issues such as a number of convictions or accidents; exceptionally valuable cars; health problems; a home in a high-crime area; or any of a long list of problems may find it easier and cheaper to ask a knowledgeable broker to look for quotations.

Many people think that all comparison sites offer the same policies at the same prices

This is not true; different price comparison sites have different deals with insurers. They usually receive payment of some sort from them when a visitor buys a policy. Just how much this commission is can vary from one company to another; and this payment comes, of course, out of your pocket. In addition, most of them include different 'extras' in some of their quotes; these include such benefits as windscreen cover, a courtesy car in the event of an accident, legal representation, etc. They are often very profitable addons for the businesses that sell them. However they can make it difficult to compare like for like, and often they are of little benefit to drivers who are looking for the cheapest possible quotes. This is why those who are looking for the best deals may be well advised to visit multiple comparison sites. They may well find identical policies, from the same insurers, at different prices in this way.

Most people only get prices from one comparison site, because they expect to receive quotes from over a hundred different insurers.

This was confirmed in a survey commissioned by the FCA. In fact, although most comparison sites claim a panel of over a hundred companies, you are only likely to receive quotes from a fraction of these. Furthermore, the majority of companies that offer quotes are not insurers at all, but are brokers, who package up policies (adding on their own 'cut', of course) that are underwritten by insurance companies which, often, they are actually competing with! Thirdly, many of these brokers are actually owned by the same companies, which are simply trading under different brands. Add this to the fact that most sites are still only offering policies from companies that they have a commission agreement with and it is clear that the choices from each of these comparison sites is far more limited than the expensive advertising seems to suggest. All the more reason to get quotes from as many of them as possible.

The drawbacks to paying monthly

Insurance companies like to get all their money in advance. It saves them a lot of administrative costs. However, they realise that a large proportion of motorists have difficulty in finding the money to pay their premiums, particularly if they fall due towards the end of the month, or at expensive periods such as Christmas or holiday periods. So, they have to offer installment plans, otherwise their competitors would take all that business. However, those that offer the cheapest policies have to balance the advantages of gaining this business, which pushes up costs, against the additional customers they could attract by cutting overheads and keeping premiums as low as possible. On the other hand, insurers that work on a higher profit margin (in other words, charge higher premiums!) have more leeway and can often offer easier terms whilst still remaining profitable.

This can mean that the insurers offering the lowest deposits and the easiest repayments can charge the highest premiums; whilst the cheapest companies are more eager to be paid the full sum in advance. You will very rarely find any companies that offer the lowest premiums, the smallest deposits, the longest repayment periods and the most competitive interest rates at the same time. You could therefore find yourself forced to pay far more for your cover, just for the privelige of buying your policy on credit. There is often a way round this though......

Why you should sometimes talk to the insurers

If you compare prices you may see that some of the cheapest quotes come from companies such as Admiral, Bell, Diamond or Elephant, but you could get a message like "Monthly premium Instalments not available". These companies are all owned by the Admiral Group PLC (who also own confused.com. Confusing isn't it!) and they insure quite a lot of younger drivers. Young motorists often haven't had a chance to build up a credit record so they often have a poor credit rating. This is one of the reasons why insurance companies are careful about monthly payments; they don't want to have to chase people who are having difficulties keeping up with the payments. However, if you ring them up you may well be able to come to some arrangements. Car insurance is a very competitive business and if you are likely to be a good customer they will want to have you as a client. So, yes, get a quote online and then, if the insurer you would like to deal with either doesn't offer easy payments, or insists on a huge upfront payment, it might well be worth your while to ask them to be more accommodating.

Why insurers like payment plans

It costs insurance companies a lot of money to find new business - all those television commercials are very expensive. So, once they have attracted their customers, they want to keep them. At renewal time it is easy for customers to continue paying monthly (at a new, increased rate, sadly!) and very often the insurer will not require an additional deposit because the motorist has already shown creditworthyness. If this person was to move elsewhere, it would be necessary to either pay in a lump sum or find a deposit again; this customer is, therefore, far less likely to look for a cheaper quote and perhaps go elsewhere.

This means that, even if their online quotes specify that they don't automatically offer deferred payment plans, you are likely to be met with a sypathetic response if you telephone them, explain that you would love to deal with them, but can only do so if they allow you easy payments.

Sometimes there are cheaper ways of raising the money for your policy

Often, to be in the strongest position to get the cheapest possible quote (whilst still getting adequate cover from a reputable insurer) you should be in a position to pay upfront. You may wish to consider taking out a loan, if you can get one at a lower APR than the insurers would charge (see our paragraph headed 'Monthly payments usually involve additional charges' above). Alternatively, you may wish to get a credit card with either a very low interest rate, or even none at all, and pay for it that way. You can compare credit cards at most of the major comparison sites such as confused.com, gocompare.com, moneysupermarket.com or comparethemarket.com. Whether or not you would qualify would depend upon your credit rating and it would be vital to make sure that you were able to meet the repayments that would be needed to pay off the loan before the bonus period ended. If you were to miss payments and fall into arrears the card company could charge you heavy penalties.

Your cancellation rights

Some motorists think that they can buy a policy, make the first couple of payments and then just stop paying if they sell their cars, suffer economic hardships or for any other reason. This is incorrect because the contract inevitably includes an agreement on the part of the buyer to meet all the repayments. Cancellations like this can be very expensive for insurers who not only lose the premiums but they have also, probably, paid a commission to the brokers or online search organisations. This is why some of them can be very choosy about the credit worthyness of their clients who pay their premiums in this way and almost invariably they persue the non-payers, through the courts, if necessary.

It is, however, possible to cancel a car insurance policy at any time, but there are conditions laid down in the initial agreement. Provided that no claims had been made, a proportion of the total payable premium can usually be credited to the buyer but this can vary considerably. Very often, towards the end of the term a cancelling policy holder may be entitled to no rebate at all, and be left, not only with no insurance, but also with an obligation to continue making the agreed payments. Some insurers do, however, allow cancellations on very generous terms. We have seen penalties as low as £25; in other words the insured person could return the cover note, stop paying the premiums, pay this £25 and that would be the end of the matter. Many other companies, though, are far less sympathetic. This is another reason why it is essential to read the policy documents before committing to an insurance contract. All insurers are compelled by law to make these available in easy-to-understand English, and there is always a summary of the main benefits and obligations for those who don't want to wade through a lot of detail.

Sadly the majority of motorists never read these documents, which often leads to disputes because of misunderstandings.

To sum up:

To find the best possible finance deal you should get as many quotes as possible from both multiple comparison sites, and from the insurers themselves. Be prepared for the fact that if you cannot, or don't want to, pay the full premium in advance you may find that the lowest deposits or easiest terms are offered by the more expensive insurers. Don't be afraid, however, to ring the office of any insurer whose quotes you find acceptable, but which doesn't appear to offer a repayment scheme, and offer to give them your custom if they will allow you some leeway. Provided that you have a reasonable credit standing they may well do so.

If you can raise the money to pay the premium in some other way, at a lower cost, then that may be worth considering.

Either way, it is essential that you get independent qualified advice before committing yourself to any financial transaction of this type. A properly qualified insurance broker may be a good person to approach for this.

 

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