Car insurance can be expensive, especially if your insurer wants you to pay the premium for a six-month or one-year period upfront in a lump sum. Some auto insurers will allow you to purchase no-down-payment car insurance, but this can end up making your rates higher. You should also understand what getting car insurance with no money down could mean for your overall budget.
We’ve researched the best car insurance providers and looked at the coverage they offer, their rates, and customer reviews. We recommend getting several free quotes before you make your decision. To get started, fill out the form below to see what rates are available for you.
In this article:
- What Is A No-Down-Payment Car Insurance Policy?
- Why Do Car Insurance Companies Require Down Payments?
- Is A No-Down-Payment Insurance Policy Even Possible?
- How Do Car Insurance Companies Determine Rates?
- Do I Qualify For A Car Insurance Discount?
- Avoid Costly Mistakes If You Can’t Afford Car Insurance
- How To Find Affordable Car Insurance
- Our Recommendations For Auto Insurance
What Is A No-Down-Payment Car Insurance Policy?
A no-down-payment car insurance policy is a policy that only requires you to pay the first month of your premium when you initiate your auto insurance policy. Most car insurance providers let you choose from a variety of payment options, including annual, semi-annual, quarterly, or monthly payments.
Why Do Car Insurance Companies Require Down Payments?
A down payment is not an extra fee added to 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 premium 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 policyholders who pay the entire premium upfront a significant break on the total cost of coverage. The amount of 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
A customer who wants to avoid making a down payment often raises a red flag for auto insurers. A company may think the driver 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 auto 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 of money if it hasn't received a down payment and the customer cancels the policy. Since insurance companies want long-term customers, many require all customers to make a higher initial payment.
Is A No-Down-Payment Insurance Policy Even Possible?
Insurance companies offer a variety of payment plans, but not all options 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. If you can't find a provider in your location that offers no-down-payment insurance, consider one that offers a low down payment.
How Do Car Insurance Companies Determine Rates?
An auto insurer will look at many factors to set your premiums. So, your insurance quote will be personalized and is unlikely to be the same as your neighbor's. Here are some of the most common factors that will influence your rates.
- Vehicle: 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 of specific makes and models can affect insurance rates as well, since some vehicles are more likely to be involved in accidents or cost more to repair than others.
- Location: 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.
- Age and gender: Your age and gender can affect your average car insurance payment 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. Auto insurance 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.
- Driving habits: 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.
- Credit scores: In most states, insurance companies take a person’s credit history into account when setting premiums. Credit can’t be considered when setting car 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 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 certain period of time)
- Being a good student
- Operating a vehicle equipped with certain 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 (also known as 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 provider offers the cheapest car insurance 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 shop around and compare car insurance quotes from several insurers and to get specific figures that apply to you and your vehicle.
Use our tool below to start comparing free car insurance quotes in your area:
Avoid 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 car insurance rates because you let your previous policy lapse.
How To Find Affordable Car Insurance
Talk to an insurance representative about the types of auto insurance 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 car insurance coverage. If you lease your car or have an outstanding auto loan, however, you may be required to maintain full coverage auto insurance 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 policyholder 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.
Lastly, it’s a good idea to compare auto insurance quotes from multiple insurers. To get started with your free quotes for cheap, no-down-payment auto insurance providers, use the easy tool below.
Our Recommendations For Auto Insurance
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. The providers below are great options for cheap car insurance. You can read more about these and other insurers in our review of the best auto insurance providers of 2021.
USAA Insurance: Best For Military
We rate USAA 5.0 out of 5.0 stars. If you or someone in your family is a current or former member of the military, check out USAA car insurance. The insurer holds AM Best’s highest possible financial strength rating, A++, and ranks highly across the United States in the J.D. Power 2020 U.S. Auto Insurance Satisfaction StudySM. In many states, USAA offers lower rates than any of its competitors. For more information, read our USAA auto insurance review.
Geico Insurance: Best Overall
Our team rates Geico 4.5 out of 5.0 stars. Based on our research, we consider Geico the best car insurance company overall. It offers a variety of discounts and competitive rates. Geico ranked well in the J.D. Power 2020 U.S. Auto Claims Satisfaction StudySM and holds an A++ rating from AM Best and an A+ rating from the Better Business Bureau (BBB). For more information, read our Geico auto insurance review.
State Farm Insurance: Best For Students
We give State Farm 4.5 out of 5.0 stars. State Farm auto insurance also ranked highly in the J.D. Power Claims Satisfaction Study. State Farm offers several apps to help consumers manage their policies and submit claims. Policyholders can also use an app to track their driving habits and another to complete driving courses that can help them qualify for discounts. Read our State Farm auto insurance review for more.
AAA Insurance: Best For AAA Members
We give AAA insurance 4.0 out of 5.0 stars. If you already have a roadside assistance membership through AAA, you may be able to get cheap auto 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. For more, read our AAA insurance review.
In an effort to provide accurate and unbiased information to consumers, our expert review team collects data from dozens of auto insurance providers to formulate rankings of the best insurers. Companies receive a score in each of the following categories, as well as an overall weighted score out of 5.0 stars.
- Industry Standing: Insurers with strong financial ratings and customer-first business practices receive the highest scores in this category.
- Availability: We consider availability by state as well as exclusions for specific groups of drivers.
- Coverage: This rating is based on types of insurance available, maximum coverage limits, and add-on policies.
- Cost and Discounts: Our research team reviews sample quotes for a variety of drivers in every state. Companies with lower prices and many car insurance discount opportunities receive the best scores.
- Customer Service: We comb through customer reviews and consumer feedback studies from experts like J.D. Power.
- Technology: Auto insurers with mobile apps, advanced online services and telematics are more likely to meet consumer needs.
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