Can you insure a car without paying anything upfront? Can you get car insurance with a small sum in advance, and monthly repayments?
Buying any insurance policy without at least paying something towards it isn't legal. A policy involves a contract between you and the insurer, and for that to be effective, there needs to be a 'consideration'; in other words you need to lay some money down. This can be paid by a credit card, however, so the cash won't actually leave your bank account for some time. There are a number of price comparison sites which allow you to compare advance payments and monthly premium charges too, so you may save some money by comparing quotes.
How much money would I have to put down?
We've carried out some research by making 100 price comparisons for different motorists, using several different price comparison engines, and as you can see the required sums varied considerably.
Briefly: we found some insurers willing to accept a 10% down payment, and a
larger number insisting on at least 20%. Quite a lot of insurers asked
for even more than that. What is perhaps more important is that we found
a number of motorists who admitted to having poor credit ratings not
only found that their down payments were higher than average, but the
interest charges they faced were raised, as well. This seems to confirm
the suspicion that some insurers, at least, are carrying out background
credit checks during the application. They are allowed to do this
because the price comparison engines include this provision in their
terms and conditions, which have to be accepted before quotations are
So, the sum you will need to pay in advance is likely to vary considerably from one insurer to the next, and they are all likely to consider how much of a risk they think there is of you (a) being involved in an accident before the premium is fully paid for or (b) failing to complete the payments, which means even more uncertainty. You'll only find out when you get the quotes, so you really have to shop around to get the best offers.
Up until fairly recently it was possible to pay a twelfth of the yearly premium, plus a little more to cover finance charges. The insurers have hardened their attitudes lately and now a number of well-known companies don't offer easy payments at all.
Does it cost more to pay monthly?
You are likely to face finance charges, because, in
effect, you are borrowing the premium. Sometimes the insurance company
itself provided the 'loan', but often it is provided by specialist
finance companies. It is generally accepted that you would, on average, pay
more than 11% extra for your policy. This is what is called a 'flat
rate' however, and is not the same as an APR of 11%. This is
because the sum you owe falls gradually, as you make your monthly
payments; for example, after six months from starting the policy you
should only owe about half of the original sum, and after 9 months just
a quarter or so. An APR is charged on just the balance outstanding,
whilst the flat rate you are charged is based on the whole amount that
you originally borrowed.
A flat rate of 11% actually equals an APR of about 19.7%.
Apart from that, the cheapest priced insurer is rarely the one that offers the lowest pre-payment. If you want to put down as little as possible initially, you will probably have to accept a policy that costs more than you would have to pay, if you paid for a year upfront. A number of insurers who don't now offer monthly repayments are amongst the most competitively priced companies, so
there may be several of the best offers which are, therefore,
unavailable to you.
This means that, in exchange for paying monthly, you could end up paying
considerably more for your insurance than you would if you able to
choose a cheaper policy by paying in advance.
So what is the cheapest way of paying monthly?
If you can raise the money from another source, you may not only find yourself paying a lower interest rate, but you could have more choice of policies. By being able to pick the best policy to suit your needs, regardless of whether or not the insurer offers monthly repayment terms, you might be able to save yourself a lot of money. If you could get an interest-free credit card to cover the premium then so much the better; companies like confused.com, the AA or comparethemarket.com offer credit card price comparisons and you may find your best deal through one of them.
Which price comparison sites offer the lowest quotes?
We didn't find any which offered substantially better terms than the rest, so to get the best possible offer you may wish to compare prices, and up-front requirements, from several of the more well known services. It shouldn't take too long, most applications can be completed within 5-10 minutes at the most.
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