The insurance trap adding as much as £257 to your car cover
However, analysis by GoCompare found premiums for paying monthly vary greatly between insurers and some young drivers can see as much as £257 added to the cost of their cover.
Almost a third (31%) of drivers currently pay monthly for their car insurance and previous studies have shown that people who pay for their insurance monthly rather than annually are up to 33% less likely to switch provider.
Monthly payers are also much more likely to need to save money on their outgoings. Almost half (47%) of drivers from lower-income households pay monthly for their car insurance, compared to just 29% of those from the highest earners.
Lee Griffin, chief executive of GoCompare, said: “Car insurance is always cheaper when you pay one annual payment, but drivers who can’t afford to do that are hit by additional costs. 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. It can become a cycle of paying more, for people who can least afford to do that.
“At the very least, you need to check what your insurer is charging for monthly payments and if you are with an insurer that charges 17% extra for monthly payments, it is going to be well worth shopping around for a better deal.”
How to break free from the monthly insurance trap
- Be aware of the costs involved with paying monthly. While it spreads the cost into manageable chunks, it isn’t free
- Could shopping around and switching reduce the overall cost of your insurance? As always, the easiest way to bring down the cost of your insurance is to switch to a better deal
- Do you still need to pay for your cover monthly? Many people opt for monthly payments when they first start paying for insurance. It is worth reviewing if you really need to pay that way now
- If you need to spread the cost of your insurance, consider taking out a 0% purchase credit card and set up a direct debit that will clear the total payment over the 12-month term of the insurance. Overall this will work out cheaper than paying the interest charged by insurers.