Auto Insurance companies will all require a down payment—of sorts. Even if a company offers a “no-down-payment” plan, you will still be making up for those costs somehow, even if they try to hide it.
Even if it’s not explicitly labeled as a down payment, auto insurance companies will require some money upfront, though some less than others. Let’s investigate this further.
Why Auto Insurance Companies Have Down Payments
Down payments are a frustrating and seemingly unnecessary expense. It especially doesn’t help when you are paying for a new vehicle on top of it.
Well, as annoying as it is, this is the way pretty much all insurance is structured. Auto insurance prepares for and covers potential risks. Your payments are based on your physical risk, but companies are also considering your financial risk.
A downpayment simply ensures your financial accountability. And, they help cover the cost of signing up a new client. Without getting into too many business details, signing up a new customer is far more expensive than keeping a current one—a down payment account for this.
Why a Down Payment May Be Better Than You Think
Most auto insurance policies are set up to last 6-months to a year with the option to renew at the end. When making a downpayment, you can expect to see that cost returned in your premium payments.
This means that, for whatever you pay for your down payment, the company will return it in your month-to-month installments. Let’s say you have a $600 6-month policy:
- Without a downpayment, your monthly premium will be $100.
- With a 10% (or $60) downpayment, your premium reflects that, and reduces to $90 a month.
- At a 20% (or $120) downpayment, your premium would be $80 a month, and so on.
A down payment isn’t worthless, but can actually help to reduce your monthly payments and make costs more reasonable.
How To Lower Your Initial Auto Insurance Costs
If you are having a hard time covering this down payment or any initial costs, there are a few ways to save.
When signing up for a plan, ask for high-deductible options. This will greatly reduce your initial and even monthly fees but will cost a lot more out-of-pocket when you have an accident. Also, see if your current company for other types of insurance offers auto insurance. In most cases, this same company will offer a lot lower upfront costs for existing customers.
We Will Find You Great Coverage You Can Afford—Contact Redwood Agency Group
The cost of auto insurance is scary, and no one wants to pay a lot upfront. But, with Redwood Agency Group, you can be sure that we will find you a policy you are happy with. If you would like to get started, contact one of our agents today at (512) 994-0894.