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6 Tips for Finding Low Down Payment Auto Insurance

We all agree that car insurance is an additional expense that can be burdensome at times, but it is a necessary evil if you have a car. There are a few things that you can do about it to make the cost of auto insurance easier to deal with. One way is to find a lower down payment option.

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Finding a down payment that is lower is not necessarily saving you money, it is just helping you to juggle your finances in a better way. Likely as not, you will be paying the same amount—or even a bit more—in the long run, but it will be easier for you to make your payments.

Tightening Your Budget

If your finances are so tight that you are finding a down payment to be a real burden, then perhaps it is time to do some cutting in your budget. This can range from finding less expensive coverage, to taking a car off the road, to cancelling your cable for awhile.

Cutting expenses out of your budget in order to pay your insurance does not include lowering your coverage limits or dropping necessary coverage options altogether.

If you are going to drive your vehicle, then you need to have adequate coverage to protect you from truly staggering expenses from an at-fault accident down the road. Read on for 6 tips to finding low down payment auto insurance that will help you stay within your financial budget.

Tip #1: Lower Your Overall Risk

The first way to find a less expensive down payment will lower the overall cost of your auto insurance, but it is not a quick fix. If you want a lower premium altogether, then you will need to lower your driver risk in the eyes of the car insurance companies.

All insurance companies assess your risk, which is the likelihood of having a claim for an accident, theft, or other loss in the future. There are many factors that go into assessing your personal risk as a driver. Every insurer uses a different combination of factors, and they are not entirely forthcoming about the details.

There are a few main factors that are used by just about every insurance company to assess risk, and many of those are within your control. In order to improve your risk and thus lower your rates, you need to improve those factors within your control.

The first is you driving history. Those who speed or have many at-fault accidents are deemed more likely to continue such risky driving behaviors into the future, so they will be assessed a much higher rate. The best fix for a bad driving record is a good driving record.

Changing your driving record from good to bad will take time, as most insurers go back three years, though some go back five. Major offenses like DUI and reckless driving convictions may stay on your record for seven years, ten years, or even longer.

Obey speeding laws and rules of the road, and drive as defensively as possible. While you are putting in days, weeks, and months of good driving, try to find a safe driver course that will get you discounts and take points off your license.

For example, the New York Department of Financial Services maintains that drivers can take a course, either in a classroom or online, that is approved by the state’s Department of Motor Vehicles, and receive a discount. Insurers must apply the discount to various parts of a policy for three years. Additionally, the driver can have up to four points removed from his or her license.

Other ways to reduce risk include driving less and driving a vehicle with higher safety ratings. Furthermore, you can also realize discount savings from keeping your vehicle in a locked garage and installing an anti-theft device.

Tip #2: Improve Your Credit

Improving your credit will not only help you to lower your overall premium, but it can also help you to lower your down payment. Often, insurers look at credit scores to determine the amount of a down payment as well as to calculate risk.

If your credit is poor, then the insurer may require a larger down payment. A low credit score spells increased risk of claims and nonpayment in the eyes of insurers. The provider will want a larger chunk of the premium upfront as a safety net against your perceived poor financial decisions.

Improving your credit will also take time and a change of bad habits, but the rewards of a good credit score go beyond just car insurance.

The Federal Reserve offers tips for improving your credit, such as making bill payments on time, keeping your credit card balances low, and checking your report for errors at least once a year.

Once your credit score has improved, you will find that you likely qualify for lower rates and less of a down payment. Even if your state laws keep insurers from using your credit score to calculate your risk, they may still be able to use it to determine the size of your down payment.

Tip #3: Increase Your Number of Installments

Another option that will help to lower your down payment is to find a company that will allow you to break your payments up into as many installments as possible. Stretching your payments out to monthly payments will make for smaller installments. Your initial deposit will be lower by comparison.

Say, for instance, that you have a six-month policy that costs $1,000. If you divide your premium into four payments, then your first payment will be $250 or more. If you split your payments into six payments, then your payments will be divided into about $166 each.

Keep in mind that an insurance provider may not simply split your premium into six equal payments for a six-month policy; each provider has its own rules regarding payments. One provider might require the equivalent of two months’ payments while another might require 30% of your entire premium.

However, your down payment will usually be smaller if you have six total payments rather than two installments, three installments, or even four installments. The Massachusetts Office of Consumer Affairs and Business Regulation offers a list of the payment schedules of various auto insurance companies in that state. The requirements for a down payment vary widely, depending upon factors such as the number of installments and whether clients are new or repeat customers.

Tip #4: Find a Lengthy Policy

Just as increasing the number of installments can decrease your down payment, so too will extending the length of your policy. A 12-month policy will offer you more installment options than a six-month policy.

Generally, car insurance policies of longer length will require much lower down payments.

You might be required to only pay 10% of your premium for a 12-month policy for your first payment.

It is important to also keep in mind that most insurers charge a fee when you pay for your policy in installments, so you will actually pay more for your policy in the long run. Yet, many people can’t afford to pay for their premium all at once. You may have no choice but to look for an option that increases the number of installments, and pay more for your policy.

Tip #5: Locate the Right Company

As stated before, each company has its own policies regarding down payments. Look for a provider that offers low down payment options that will fit your budget. If one company requires the equivalent of two months’ worth of payments for your policy and another requires 30% down, then you will likely have a much lower initial payment with the first provider.

Know also that an insurance company’s initial payment policies may be in keeping with state law. For instance, in the state of Texas, payments of at least four installments for a six-month policy and at least 10 installments for a 12-month property are a right given to drivers by the Texas Department of Insurance. Additionally, as stated by the Department, the initial deposit payment cannot be more than two months’ worth of coverage.

Furthermore, some providers will also allow you to choose the date of your payments. You might be able to choose the first, 15th, or last day of the month to make your payment. While this option won’t lower the amount of your down payment, it will offer more flexibility for your finances.

It is also important to note that cost is not the only area that you should consider when looking for an insurance provider. Cheap coverage from an unreliable company is not better than a more expensive policy with a reliable and stable insurance provider. Make sure that you are considering other important factors beyond just cost and your down payment.

Tip #6: Shop Around

Lastly, you should always shop around and compare quotes to find the best rates when you are looking for car insurance. Getting many quotes is the best way to find a more affordable price, as insurers really do offer premiums that vary a great deal.

If you find a much cheaper policy for the same amount of money, then your down payment will also likely be cheaper. A lower price for a policy is even more important than an insurer’s deposit requirements.

For instance, if the insurer that requires that you pay 30% for your initial payment is offering a $1,000 policy, then your down payment will be less than the one requiring two months’ worth of a $2,500 policy.

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