Monthly Car Insurance Doesn't Have to Break the Bank

News provided by

moneysupermarket.com

09 Jan, 2012, 17:00 GMT

CHESTER, England, January 9, 2012 /PRNewswire/ --

  • 5.34 per cent extra to the cost of the original premium

The cost of running a car hit many motorists hard in 2011 and as we start the New Year, some people may want the ability of paying for their car insurance in smaller monthly instalments to keep budgets manageable. However, failure to identify the best value 'pay monthly' option could prove costly according to research by MoneySupermarket.com.

Driving a car has never been cheap, but the rising cost of petrol took its toll on motorists in 2011.  A MoneySupermarket poll of over 10,000 respondents found the main impact on personal finances last year was high petrol prices (42 per cent[1]) so this New Year Brits will no doubt be looking for ways to cut the cost of motoring. 

Britain's number one comparison site looked at the options available to consumers who want to pay their annual car insurance premium in monthly instalments[2]rather than pay the premium in one lump sum. The analysis found most insurers charge their customers for this privilege; those who decide on monthly repayments can expect to pay on average an additional 10.75 per cent to the cost of the original premium[3]. This can be dramatically reduced however, if motorists shop around for the best deal - some insurers charge as little as a 5.34 per cent for the convenience of smaller monthly repayments.

Pete Harrison, car insurance expert at moneysupermarket.com, said: "Running a car isn't cheap, made worse by the rising fuel costs we have all had to find the money to cover. Paying a high premium upfront for car insurance can be another huge strain on your finances so paying it monthly in smaller, more manageable amounts is a good way of making your insurance easier to afford. However, it's crucial to make sure you're aware of the additional costs involved. Motorists should also scour the whole market to ensure you find the most reasonably priced deal.

Motorists could consider other financially-savvy ways to spread the cost of their car insurance premiums, such as using a zero per cent purchase credit card.

Pete Harrison continued: "By putting the cost of the premium on to a zero per cent purchase credit card, such as the Tesco Clubcard Credit Card which offers 0 per cent on purchases for 15 months, drivers can pay for their policy in monthly instalments without paying interest. There are a number of zero per cent purchase cards on the market, so if you are eligible, you'll only pay for the original price of your policy, although check that the insurer may charge a small fee for paying this way. However, you need to be disciplined if you use a credit card, and pay off the balance before the end of the promotional period, and within 12 months if the promotion is longer otherwise you will still be paying when your insurance is up for renewal."

Notes to editors:

[1]What has impacted your finances most in 2011?

  • High petrol prices (42.3%)
  • Rising bills (20.5%)
  • Benefit cuts (4.8%)
  • Debts (17.1%)
  • Low savings rates (2.4%)
  • Falling stock markets (5.5%)
  • Mortgage/rent payments (4.5%)
  • Redundancy/unemployment (2.7%)
  • None of the above but I am worse off than last year (0.1%)
  • None of the above, I'm actually better off than last year (0.1%)

Total Votes: 10491

Voting Ended: 28/12/2011

[2]Car insurance monthly repayment structure typically involves an initial deposit (around the value of two months instalments) - the remaining balance is then paid as a set amount over nine or ten months.

[3]On average the percentage increase to the original cost of an annual policy by paying an insurer in monthly instalments (based on the insurer's APR) is 10.75 per cent - based on a selection of car insurance providers on 06.12.11 

Full breakdown of percentage additional costs available on request.

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SOURCE moneysupermarket.com