Drivers who pay for their car insurance policies monthly are paying an extra £73 a year compared to those that pay annually – meaning auto insurers are bringing in an extra £1.5bn per year.
A new study from MoneySuperMarket reveals that 45.5% of drivers opt to pay for their car insurance policy on a monthly basis rather than paying the full yearly sum up front – and end up paying 13.3% more than their counterparts.
The study, which analysed 24 million car insurance quotes, found that the proportion of drivers choosing to pay monthly has increased year-on-year – attributing the rise to the increasing cost of car insurance.
The average cost of a yearly premium for a driver who pays annually is £549, compared to £622 for those who pay monthly.
And the rewards for drivers who pay annually has increased year-on-year – in 2015, customers paying yearly knocked £62 off their premiums – equating to a £9 potential increase in savings this year.
As auto premiums rise – up 14% since last year and a hefty 28% since 2014 – it’s younger drivers aged 25-29 that have been hit the hardest, with premiums for this group increasing by 21% since 2015.
Regionally, the biggest price hikes were seen in St Albans at 21%, Harrow at 20%, and Southall, North London and Sutton all at 19%, with Aberdeen lucking out at just a 7% increase.
Kevin Pratt, consumer affairs expert at MoneySuperMarket, warned drivers that insurers would charge them to take the monthly instalment route.
“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,” he said.
He also added that consumers should shop the competition to find the best rates: “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.”
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