0 Down Car Insurance: Everything You Need to Know (2024)

When you purchase car insurance, you pay a hefty premium, down payment or deposit for the coverage. There might be times when you require immediate coverage but don't have the budget to spend thousands of dollars on the down payment. This is where zero-down car insurance plans come to your rescue.

Zero-down car insurance is an insurance policy that doesn't require an upfront premium or deposit at the time of policy purchase. Instead of making the down payment or paying the premium in full, you can spread the insurance cost over the policy term through monthly payments.

The most significant benefit of zero-down vehicle insurance is that you can commence the coverage immediately without paying a lump sum when purchasing it. This is a massive perk for individuals who do not have the budget to pay a large sum upfront or who prefer smaller monthly installments.

Here, we'll walk you through the pros and cons of zero-down car insurance and share tips to help you find the best deals on auto insurance. We highly recommend comparing quotes from the best car insurance providers to get the most coverage for the best price.

What Is Zero-down Car Insurance?

Zero-down or no-down-payment car insurance is an auto insurance policy that doesn't require you to pay a down payment or the premium in full at the time of policy purchase. You can start enjoying coverage by just paying the first month's premium. However, note that zero-down car insurance doesn't mean you're getting free car insurance.

When insurance companies offer you coverage, they take on the risk of insuring you and your vehicle. Because of this, they usually charge a hefty premium or deposit at the time of policy purchase. With zero-down car insurance, you're still paying the premium to the insurer. The only difference is that you spread the premium amount as smaller monthly installments throughout the policy term.

Let's say your annual premium is $1,200, and you decide to make a down payment of $200. In this case, your monthly payment for the rest of the policy tenure is approximately $83.33 before considering taxes and other fees.

In contrast, with zero-down car insurance, you can skip the upfront down payment. Instead, your monthly cost will be $100 for the rest of the policy period, along with fees and other charges car insurance companies might have.

Is Zero-down Auto Insurance a Good Choice?

While zero-down car insurance might seem attractive at first, it also has downsides. Make sure to understand the pros and cons to make an informed decision:

Pros of Zero-down Car Insurance

• Immediate coverage: Zero-down policies allow you to start coverage as soon as you pay the first monthly premium installment. This is a considerable advantage, especially if you require insurance immediately and cannot afford a large deposit or premium at the time of purchase.
• Improved cash flow: With zero-down auto insurance, you spread the premium cost over the policy term. This helps you to manage your cash flow more effectively. This is a huge advantage for individuals without extra savings or who have other ongoing financial obligations.
• Increased accessibility: Zero-down policies make auto insurance more affordable to individuals who do not have the financial means to pay a hefty premium upfront. It provides people with the necessary coverage to drive their vehicles without spending thousands of dollars at one time on auto insurance.

Cons of Zero-down Car Insurance

• Increased overall costs: While zero-down policies eliminate the need for an upfront payment at the time of policy purchase, you're still accountable for paying the total premium over the policy term. In some cases, insurance providers might charge additional fees like administrative costs to compensate for the lack of an upfront premium. This means you might end up paying more than what you would have paid if you had chosen to pay the premium in full upfront.
• Additional interest charges: Some insurance providers might levy other interest on the monthly installments, which could increase the policy's overall cost in the long term.
• Limited options: This is a significant disadvantage of choosing zero-down auto insurance. Not all insurance providers offer no-upfront premiums. This means you have limited options for finding the best deals and coverage.
• Cancellation penalties: With a zero-down insurance policy, even if you find a better plan from another provider, you might be unable to terminate your ongoing policy before the end of the term. Even if the insurer allows you to cancel the plan, you might be subject to cancellation penalties, which could be expensive.

It's crucial that you review the terms and conditions of the car insurance policy thoroughly to understand any interest charges, termination penalties, and other fees. This is why we highly recommend that you research and compare auto insurance quotes from different providers to ensure you're getting the most coverage at the best price.

Top Providers of Zero-down Car Insurance

As we mentioned above, not all insurance providers offer zero-down auto policies. You might find it at popular insurers like Geico, Progressive, State Farm, Nationwide, Farmers Insurance, The Hartford, USAA, Amica, Erie Insurance, MetLife, and others. However, even among insurers who offer zero-down auto policies, you're unlikely to be eligible for it if you have a poor credit history or own an expensive vehicle.

You'll likely get approval if you have a good credit score and drive an older or less costly model. Even if you find a company offering a zero-down auto insurance policy, research the provider, as several companies do not have the financial stability to pay out claims.

How to Save on Car Insurance?

Inflation, expensive accidents, the global semiconductor shortage, and supply chain woes contributed to the higher auto insurance costs in 2023. According to a Forbes Advisor analysis, the national average cost of auto insurance is a whopping $1,601 annually. Even if you don't find a zero-down auto insurance policy that fits your coverage needs, you can still secure affordable car insurance policies that don't break the bank.

Here are a few tips to help find cheap car insurance and save on your premium:

Compare Multiple Quotes

Auto insurance prices vary from one insurer to another. So, take the time to shop around. Get auto insurance quotes from at least three companies. Even a few dollars saved on the monthly premium could help you reduce the overall costs significantly.

Bundle Your Insurance Policies

Many insurers offer extra discounts to retain existing customers. For example, if you already own a home insurance plan from a specific company, you might be eligible for additional discounts if you purchase your auto insurance from the same provider.

That said, it still makes sense to shop around instead of sticking with the same provider. The best way to save money on auto insurance is to compare multiple quotes and choose the one that offers you the best coverage for a minimum price.

Improve Your Credit Score

Several states allow insurers to review your credit score and history when setting rates. A solid credit history cuts your insurance costs significantly. This means the higher your credit score, the lower your premium.

Before applying for auto insurance, check your credit reports for errors or inaccuracies, and get them corrected promptly. You can also improve your credit score by paying your bills on time, keeping your credit balances as low as possible, and not opening new credit accounts immediately before applying for insurance.

Explore Discounts

Insurers offer discounts for specific customers. For example, if you recently purchased a home, got married, or are a young driver with a clean driving record and a good student, you might be eligible for an auto insurance discount. Furthermore, completing a state-approved defensive driving course from online schools like Aceable might make you eligible for an auto insurance discount.

That said, the discounts vary from one insurance provider to another. So, ensure that you compare quotes and check with different providers on the additional discounts available.

Some insurers offer special plans for drivers who drive within a specific number of miles every month. Consider carpooling to work to reduce your average annual mileage and be eligible for this discount. However, note that this option might not be available for all.

Reduce Coverage on Older Vehicles

If you own an older vehicle whose market value is less than 10 times the premium, you can consider dropping comprehensive insurance and collision coverage. You can check with your auto dealer to know the current market value of your car.

Or you can look it up online using Car and Driver's car value calculator. Make sure to review your insurance coverage at renewal time and choose the right plan based on your current needs and budget.

Increase Your Deductible

The car insurance deductible is the amount you pay out of pocket during a claim. By choosing a higher deductible, you can reduce the premium. For example, according to the Insurance Information Institute, increasing your deductible from $200-$500 could reduce your coverage costs by 15-30%. Raising the deductible by $1,000 could save you a whopping 40% or more on the coverage costs. However, before requesting a higher deductible, ensure you can afford to pay the deductible in case of a claim.

Review Your Options and Choose the Best Auto Insurance

While some companies offer zero-down car insurance, it might not always be the best choice. If you decide to go with zero-down car insurance, remember that your monthly payments depend on the insurer, your credit score, your car's model and age, your driving history, and the type of coverage.

So, make sure to review all the options, compare car insurance quotes, and choose the best policy that offers you the right coverage at affordable prices.