Insurance interest costs motorists millionsFri, 24 Jan 2014 00:00:00 -0800
BRITISH drivers are paying £682 million more than they should be for their car insurance by paying monthly.
Most insurers charge a high rate of interest for the privilege of spreading payments out over the year, with the average pay-monthly customer hit by an additional £88.
Almost a third of people (31%) pay their car insurance by monthly direct debit, market research from Consumer Intelligence has discovered.
Average interest rates among insurers stand at 23%, the firm says, leading to seriously inflated premiums and taking the average £922 annual bill over the £1,000 mark.
The lowest interest rate in the study was 9.9%, while one unscrupulous firm was charging 31.9%.
In many cases it is cheaper for consumers to buy insurance outright with a credit card and make the repayments at a lower interest rate.
Ian Hughes of Consumer Intelligence said: “Opting to pay by direct debit enables motorists to spread the payments and can be a good way of budgeting.
“However, drivers need to be aware that there is often a cost attached and that the premium they are initially quoted will not necessarily be the same they end up paying. People need to think carefully before opting for direct debit.
“An insurer which charges for direct debit can still be more competitive than one that does not but drivers have to take all factors into account when shopping around.”
By Press Association reporter