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Drivers burn £1.5 billion a year paying monthly for car insurance

24th October 2016 Print

Drivers who pay for their car insurance monthly could save £73 a year, or £1.5bn collectively, by switching to a one-off annual payment, new insight by MoneySuperMarket reveals.

MoneySuperMarket analysed almost 24 million car insurance quotes to reveal 45.5 per cent of drivers opt to pay for their premiums monthly, spending £622 on average compared to £549 for those who pay annually – a difference of £73 each year, or 13.3 per cent.

The proportion of drivers choosing to pay monthly has increased year-on-year, from 43.5 per cent in September 2014, to 45.2 last year and 45.5 this September. The potential saving has also increased year-on-year; last year customers paying annually knocked £62 off their premiums - £9 less than this year.

The rise in people paying monthly is attributable to the rising costs of car insurance, up 14 per cent since last year and 28 per cent since 2014. Younger drivers have been hit hardest, with premiums increasing by 21 per cent since 2015 for those aged 25-29.

Regionally, drivers in St Albans saw the highest price hikes year-on-year, with premiums rising by 21 per cent, followed by those in Harrow (20 per cent), Southall (19 per cent), North London (19 per cent) and Sutton (19 per cent). Aberdeen motorists lucked out with the smallest rise, as prices increased by just seven per cent. Similarly, policyholders in Newcastle upon Tyne saw their premiums go up by just nine per cent.

Kevin Pratt, consumer affairs expert at MoneySuperMarket, said: “We’re talking about not-so-thrilling instalments. Paying for your car insurance in one lump sum is a big ask, given that average premiums are well north of £500, so it’s no wonder that millions of people opt to pay monthly. But insurance companies effectively charge interest when you take that route, typically slapping another £73 onto the cost – so if you can avoid instalments, you’ll save money in the long run.

“If you simply can’t find the money upfront, one option is to put your insurance premium on a credit card that doesn’t charge interest on purchases, and pay off the balance within 12 months. That timing is important – you should aim to clear the debt in a year so that the slate is clean when it comes to next year’s premium.

“Ultimately, whether you’re paying monthly or annually, there are always additional savings to be made. With premiums rising year-on-year it’s worth shopping around for a cheaper deal – there are savings of up to £2474 to be made by switching suppliers on renewal, so it’s worth checking.”