£624 million more a year to pay your car insurance monthly
The annual cost of motoring has increased by a staggering £500 over just the last 12 months and the average UK driver now pays out £2,482 a year on car insurance and fuel.
Motor insurance companies are generating an additional £624 million a year from people who choose to pay their for their car insurance in monthly installments rather than as a lump sum. There are around 13 million drivers who pay for their car insurance in this way, and perhaps this is because the majority of them simply cannot afford to pay in one lump sum. It’s not really suprising considering the price of fuel has increased by 31 per cent since 2007 and on average we’re paying out £64 to fill our tanks! Car insurance premiums have risen by 4 per cent in the past year.
These figures, from Uswitch.com are a stark reminder of the huge rising costs of motoring in the UK:
- Motorists are forking out almost £624 million more on their car insurance by paying in monthly instalments instead of one annual lump sum
- Insurance providers are charging motorists 23.8 per cent, APR on average to pay monthly, almost four times the best buy unsecured personal loan rate of 6.9 per cent, APR
- Over 13 million or 52 per cent of UK policy holders pay for their car insurance monthly, costing them an average of almost £50 extra
- The average car insurance policy is £459.44 creeping up to over £506.76 for those who cannot afford to pay in one lump sum
If you choose to pay your car insurance over 12 months, like I do, then its costing you on average £50 more to do so.
The reason I choose to do this is because I cannot afford to pay £500 - £700 upfront. I am aware of the addtional costs involved with paying by monthly installments but there are now insurers, like Virgin, who actively promote the fact that they do not charge you extra for paying monthly. I tend to use Moneysupermarket.com to compare car insurance because I get an immeadiate idea of the cheapest car insurance quotes for my circumstances. I’ve found that some of the insurers listed here include notes along the lines of ‘no additional charge or fee for paying monthly’. These might not be the cheapest quotes you get back but it’s something to bear in mind when looking at the overall cost of others.
Insurance expert at uswitch.com, Ashton Berkhauer, comments: “As insurance costs, petrol prices and general living expenses are soaring, motorists should think twice before agreeing to monthly payments on their car insurance. It may seem like a neat solution if you’re cash strapped but it carries a hefty interest price tag so should be avoided where possible. Of course, if you can’t afford to pay for car insurance in one lump sum then this initiative could be a godsend. For those with more financial options, this really is an unnecessary expense which merely inflates the cost of the policy.”
Berkhauer’s top tips on purchasing car insurance:
- Always shop around to ensure you are getting the best deal on your car insurance policy
- If possible pay the full amount of your insurance up front to avoid paying unnecessary charges
- If you can’t afford to pay the full amount of you car insurance up front check your insurer’s APR and shop around for a more competitive alternative or look at 0% credit cards
- To avoid any nasty surprises always check your policy documentation thoroughly and make sure you understand what you are covered for, and what your excess is should you be involved in an accident
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