Motorists overspend £1 billion a year by paying for car insurance by monthly installments

Motorists who pay for their car insurance monthly could save £62 each – or £992 million collectively as a nation – by switching to an annual payment, according to research by MoneySuperMarket.com.

Almost 11 million car insurance quotes analysed by the comparison site found 43.8 per cent of motorists pay for their insurance monthly, at an average cost of £514 a year. However, drivers who pay for their insurance once a year are spending an average £452 – £62 less (11 per cent).

Therefore, those drivers paying monthly could collectively save almost £1 billion a year simply by changing the way they pay.

Kevin Pratt, insurance expert at MoneySuperMarket, said: “The cost of motoring is hefty, so it makes sense that so many people spread the cost of car insurance and pay monthly to ease the financial burden. However, it could end up costing you more in the long run.

“A handful of insurers refrain from charging more for monthly payments, but more often than not an additional cost will be applied if you opt for paying monthly rather than annually. The analysis clearly shows there are significant cost benefits overall to paying annually.

“Cash strapped motorists could consider other financially-savvy ways to spread the cost of their premium. Putting the cost of the premium on to a zero per cent purchase credit card, such as the Halifax Purchase Credit Card which offers 0 per cent on purchases for 21 months, allows drivers to spread the cost of their premium, effectively paying monthly without the additional interest.

“There are a number of these cards on the market, so if you are eligible, you’ll only pay for the original price of your policy, although your insurer may charge a small fee if you pay via a credit card. If you choose to pay using this method, you will need to be disciplined. Paying the balance off in full within 12 months will ensure that you won’t be paying for this policy when your new one kicks in.”