Customers paying for their car insurance monthly could be paying around an extra £300 on average - compared to those who pay annually. Consumer champion Which? said those customers who can often least afford to pay “over the odds” may end up doing so.
Data shared with Which? by comparison website GoCompare in January indicated that, as of November 2022, nearly half (46%) of car insurance customers opted to pay in monthly instalments. In November 2019, the average difference was £217, according to the research.
However, by November 2022, the typical difference had increased to £302, according to Which? Monthly payers faced paying just under £757.60 typically compared to £455.49 for annual payers, PA reports.
While not every “pay monthly” customer is paying more, the more severe price increases could be falling on the drivers least able to afford them, the consumer group said. According to GoCompare, younger customers often opt for monthly payments.
Jenny Ross, Which? Money editor, said: “At a time when household budgets are under huge strain, it’s concerning that customers who pay monthly for their insurance could be paying far more than those who pay their annual premium upfront. Paying using an interest-free credit card could help to spread the cost of annual premiums.
"Haggling and switching also remain effective ways of bringing down the cost of insurance. Which? has a range of free, expert advice on its website to help consumers make their money go further, including when choosing insurance.”
A spokesperson for the Association of British Insurers (ABI) said: “Insurers are conscious that the rising cost-of-living is putting increasing pressure on household budgets and are committed to offering competitively priced insurance to as many people as possible. The option to pay your premium monthly is one way of spreading your cost across the year.
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“You receive a full year’s worth of insurance at once but, similar to taking out a loan, the monthly repayments may come with added interest, which can make it a more expensive option.
"We would always recommend shopping around to find the best policy that meets your needs, not just based on price. If you’re struggling to pay your premium, speak to your insurer who should be able to help.”
