Car insurance costs could be dramatically cheaper by paying their yearly charges in one go due to increased interest rates. Many insurance companies will add between 6.8 to 17 percent added interest to total charges if they opt for monthly payment plans.
The study from GoCompare found motorists pay an average of £55 more per year for cover than those who settle all costs in one go.
However, this bill can increase to £257 for inexperienced motorists who have not proven themselves to be a safe driver.
Despite the added costs, one in three motorists in the UK decides to pay their policy every month to spread total charges.
Lee Griffin, Chief Executive of GoCompare said: “The added danger here is that people paying monthly are statistically more likely to renew again with the same insurer, without checking the total cost.
The data also found almost half of those from low-income houses opt for monthly policies to help manage costs.
Compare the Market says most insurance providers will make motorists pay a deposit fee before they are accepted onto a monthly payment plan.
Deposits will be around 20 percent for the total amount with the remainder paid back over the next 11 months of an agreement.
Interest will also have to paid back over the next 11 months as you would be taking out a form of loan to pay for the policy upfront before paying it back each month.
USwitch says road users should save for their next year’s policies every month to ensure costs can be paid upfront and avoid steep interest charges.
The AA says there are major benefits to months instalments as motorists can avoid putting a financial strain on your bank account.
However, they also confirmed saying upfront would work out cheaper in the long run as interest rates are avoided.
The warning comes just days after experts at Confused.com suggested car insurance premiums could be set to hit record highs in 2020.
The website found average costs had increased to £815 ib a five percent rise on 2018 figures.
Confused says this was the highest annual increase since 2017 and pushes age average prices just £43 off the highest ever average costs in 2011.
Published at Fri, 24 Jan 2020 10:36:00 +0000