Can you save on car insurance by paying up-front?
There’s no denying that the current cost-of-living crisis will squeeze many households, forcing them to re-assess spending and cut back on purchases.
For others, they will look to make savings in the long-term and so, for those who can afford a big outlay, buying car insurance up-front instead of monthly can help households save almost £60 a year.
According to comparethemarket, the average annual car insurance premium between January and April for drivers who paid monthly stood at £752.
But for drivers who could afford the upfront cost, the average insurance premium came to £693 – a difference just shy of £60.
The comparison site said the difference in monthly vs annual costs also stood at £59 in 2021. However, the average car insurance cover was cheaper last year, coming in at £699 (monthly), compared to £640 for a one-off annual payment.
It explained that monthly payments are typically more expensive as drivers are paying for the privilege of more manageable payments, as well as any additional fees incurred by the insurer in carrying out soft credit checks.
Comparethemarket said most insurance providers will require drivers to pay an initial deposit which is usually 20% of the annual amount. Interest is then added onto the remaining 11 monthly payments.
Meanwhile, the difference in savings between paying monthly vs. making a one-off annual payment is significantly less for home insurance premiums, at £13. The average annual sum of monthly home insurance payments this year is £190, compared to £177 for an annual one-time lump sum payment.
Alex Hasty, director at comparethemarket, said: “As living costs and bills continue to rise, many families across the UK are feeling financially squeezed. Saving on your car insurance is always attractive, considering that the average cost of car insurance is nearly £700. Although it might seem easier to make smaller monthly payments, if you’re in a financial position to be able to pay your car insurance policy annually, it could lead to helpful savings of around £60.”
For those unable to pay their insurance in one go, comparethemarket suggests drivers consider a telematics policy where driving is monitored. For those who drive consistently well, the insurer may cut the premium.
Or drivers could consider switching to a pay-by-mile policy. Here comparethemarket revealed that low mileage drivers could save more than £140.