Drivers charged £55 more on average for paying car insurance monthly
UK motorists face higher bills if they pay for car cover monthly.
21st January 2020 15:17
by Brean Horne from interactive investor
UK motorists face higher bills if they pay for car cover monthly.
Drivers who pay for car insurance monthly are charged £544 million more for cover than those who pay annually, according new data from GoCompare.
The price comparison website found that paying monthly increases the cost of the average car policy by 11.8% - adding an extra £55.36 over a year.
While some insurers add as little as 5.8% for monthly premiums, others charge as much as 17% extra.
The figures show that 31% of drivers pay monthly, rather than annually, for their car insurance.
Of those choosing to pay in instalments, a third (33%) are less likely to switch providers which could cost them more over time.
Almost half (47%) of all drivers from lower income households pay monthly for their car cover compared to just 29% of those from the highest earners.
Lee Griffin, chief executive at GoCompare, says: “Car insurance is always cheaper when you pay one annual payment, but drivers who can’t afford to do that are hit by additional costs.
“The added danger here is that people paying monthly are statistically more likely to renew again with the same insurer, without checking the total cost.
“It can become a cycle of paying more, for people who can least afford to do that.
Why is paying for car insurance monthly more expensive?
Paying monthly for car cover is essentially taking out a loan from your car insurance provider.
As a result, it will charge you interest on your monthly instalments, making your policy more expensive.
How to cut the cost of car insurance
If you currently pay monthly for cover, these tips could help you cut the cost of your car insurance.
1) Switch to annual payments
Paying annually for car insurance will make your premium cheaper.
This is because you’re making a one-off lump sum rather than instalments which will be subject to interest.
2) Shop around
If paying monthly is your only option, it’s really important to shop around for the best deal.
Price comparison websites are a great starting point and allow you to compare hundreds of deals quickly and easily.
They will also allow you to compare how much the monthly instalment interest rates vary between providers.
3) Get a 0% purchase credit card
You could spread the cost of your car insurance payments by getting a 0% purchase credit card.
This will allow you to pay for your insurance all in one go and then set up a direct debit to clear the total payment over 12 months.
The best deal on the market right now is the MBNA Purchase Credit Card which offers 0% interest on spending over 26 months.
This article was originally published in our sister magazine Moneywise, which ceased publication in August 2020.
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