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Auto Insurance With No Down Payments

Auto insurers will present you two options when you buy car insurance: pay upfront for the full year or pay monthly. You’ll either spend thousands of dollars to pay the premium for the first 12 months (which yields a discount) or you’ll pay by the month. The average premium price can be more than $2,000 annually (especially if you add title drivers such as siblings, children, parents, etc). In both cases, you must pay a down payment which the insurance provider takes as a sign of good faith that you intend to stay with the company for the long term.

The first month must be paid in advance. This is considered a down payment. Many companies require at least 2-3 months (30% of a 12-month plan) in advance. Auto insurance with no down payments exists in very few states. Most people choose to opt for the monthly option despite the increase in the total price they pay once the months add up. The down payment on the first month will vary by the provider – some waiver the first month. The only better deal than a low down payment is no down payment at all!

The most expensive states including New York and California offer no down payment requirements. It’s possible to find car insurance at no cost for the first month in those states (save for administrative fees). The down payment is considered the first required payment you must pay before you’re insured. This payment varies by provider. Some down payments can be only the first month’s cost. Example: If you have a $100/month premium your down payment will be $100. Other companies might require a higher down payment such as a percentage of the annual plan such as $300 or $500. For most insurers, the first down payment is the cost of first month. There are exceptions, however.

States That Have No Down Payment

Certain states offer auto insurance policies without down payments. There are only 7 states in the country that allow you to insure your car without paying a down payment. The 7 states where you can find auto insurance with no down payments are the following:

  1. California
  2. New York
  3. Florida
  4. Washington
  5. Georgia
  6. Oklahoma
  7. Arizona

Many insurance companies in the listed states will offer no down payment plans for the first month. This is an excellent money-saver for residents of those states, some of which are the most expensive in the country. If you’re paying exuberant amounts of money on gas, road taxes, car maintenance and insurance premiums the least you should be entitled to is a free month at the start of your policy. 

How Much Do You Have To Pay?

You don’t have to pay anything: That’s the point of no down payment insurance. The down payment in considered whoever amount of money you put up in the first month. If you’re from any of the 7 states where no down payment insurance companies operate, you can get the first month for free. You’ll, of course, be paying higher premiums once the 12 months accumulate but this is a good option for people who might not have thousands of dollars to pay for an annual premium. 

The typical payment plan for auto insurance companies will cover one month or two months in advance. As a rule of thumb, estimate 20-30% of the average 6-month coverage to determine the average price of a down payment in your state. When you consider the average down payment is 20-30% of a 6-month premium, you’ll likely struggle coming up with all that money in advance. To save money, you’ll either have to purchase the lowest-cost insurance that only requires the 1st month or no advance payment at all.

How No Down Payment Car Insurance Works

Auto insurance companies will usually lie to customers. They make it seem like you’re putting zero money down when you pay for the first month, but the administrative fees and first-month cost are still a down payment. If you spend money for the plan before they insure you, you’ve paid a down payment. If you opt for an insurer that waivers the first month this means you won’t have out-of-pocket expenses or down payments. Unfortunately, these are only available in few states (and not all providers in those states!).

Are There Any Hidden Fees?

The cumulative costs will total out in favor of the insurance company once you consider how much you’ll be spending over a 12-month period. Certain auto insurance providers will be generous and offer you a waiver on your first month’s fee/down payment. However, due to the fact that $0 down payment insurance companies are popular, they might use the opportunity to increase your premiums after your first 6 months expire.

Run Your Calculations

Example: John is a 35-year-old man with a good driving record and a used car. This should technically lower his premiums to the minimal possible. John’s insurance company quotes him $500 for the whole year, paid in full. John also has an option to pay only $50 per month for a year with no down payment. If John paid $50 per month for 12 months he paid the insurance company $600 which is $100 higher than he would have paid had he paid in advance. Although the insurance company wouldn’t request a down payment, the monthly fees still total out 10-20% more than what he would have paid if he went with the single-payment option. However, this is a good deal for people who don’t have hundreds or thousands of dollars to spare in advance.

The catch is that despite the waiver on the first month with certain providers, all providers will request you to pay an administrative fee to open the plan. This is a small additional cost on top of the first down payment. Keep in mind that virtually no car insurance company will start you off at zero dollars. However, there are always different payment plans that will work for your individual financial situation.