Car makers manufacture the cost of insurance

Over 1 million new cars were sold in 2007 and 2008 sales are likely to follow suit. As part of the sales process, manufacturers are now offering customers an ‘on the spot' insurance policy. It may seem like good customer service but in fact manufacturers are boosting their profits by £15 million a year through this carefully packaged ‘extra'. New research from price comparison and switching service uSwitch.com reveals that car manufacturers are charging 10% or £30 a year more for these policies than the price levied by the underwriter.

Insuring a new Astra 1.9 CDTi with Vauxhall costs £316.05 on average. Going straight to RBS Insurance which provide the cover for Vauxhall could bring the cost down to £287.70. However, the biggest saving can be made by some savvy shopping around. If the motorist took the best buy option offered by insure.co.uk, they could get the same car covered for only £246.55 - that's a £69.50 saving on the manufacturer's price and £41.15 saving on the underwriter.

Best Buy equivalent is more af-Ford-able

Not only do motorists pay more to buy insurance from the manufacturer as opposed to going straight to the underwriter, they also pay, on average, almost £93 (26%) more by not shopping around for a best buy equivalent. On average, an annual best buy policy can be purchased for £238, compared to an average of £330 to insure a car with the manufacturer. Consumers opting for a manufacturer's insurance are overpaying by almost £48 million a year more by not ditching it in favour of a best buy equivalent .

Ashton Berkhauer, insurance expert at uSwitch.com comments: "Motorists tempted to opt for "on the spot" manufacturer insurance must be warned that unless they are getting a full year for free they will be paying more than they need to for their cover. This is good news for the manufacturer's profits, but bad news for motorists pockets. However, it's very easy to avoid - motorists simply need to shop around to make sure they pay the lowest price for the level of cover they need. Insurance through the manufacturer rarely comes with any extra benefits, just an extra cost unless it's completely free.

"In some cases, manufacturer insurance is given away free with a new car. If a manufacturer does offer free insurance, motorists should seriously consider taking it. However, they should make sure they fully understand the policy before signing on the dotted line. Consumers need to check that the voluntary excess is not unreasonable so they won't be stung if they come to make a claim. Most importantly, they should make a note of their renewal date so they don't get stuck with the same insurer after the free cover expires. Being complacent and not shopping around could have them paying up to £170 more for their insurance policy."

Berkhauer's toptips when buying a new car:

ü Shop around for yourinsurance policybeforeyou buyyour new car to ensure you have the best possible deal.

ü Some car dealers offer oneyear's free car insurance on new cars, these deals are definitely worthconsidering but make sure you read the small print.

ü If you go for a freeinsurance policy with the manufacturer, make sure you know when the deal ends soyou have time to shop around for a cheaper car insurancepolicy.

ü Don't be fooled by thinkingthat your existing insurer will offer you the best premium rate out of loyalty -you may get a cheaper quote elsewhere by shopping around.