Monthly car insurance payments cost nearly 30% more
Drivers who pay for car insurance monthly rather than annually are being charged almost 30% extra, according to new analysis by consumer group Which?. Nine insurance brands were found to impose an annual percentage rate (APR) of 29.9% when customers choose to spread their payments instead of paying a lump sum upfront.
Which? calls out high interest rates
Rocio Concha, director of policy and advocacy at Which?, said: “Millions of motorists rely on monthly payments to afford essential car insurance cover, yet many are still being charged interest rates comparable to an expensive credit card.” The analysis highlights that the cost of spreading payments can add significant financial burden to already stretched household budgets.
Industry response from the ABI
The Association of British Insurers (ABI) responded by acknowledging the financial pressure on households. The ABI said: “The industry recognises that many households are under financial pressure, and it understands why spreading the cost of cover is essential for many motorists. Premium finance is widely used across the market with charges that can differ between insurers and by product.”
“Our members remain committed to improving outcomes, and this includes being open about the fact that providing this service involves genuine operational costs – including keeping cover in place for a period even when payments are delayed or missed. Our premium finance principles make clear that any charges must be fair, transparent, and reflective of the costs incurred by insurers. The FCA’s own market study found that premium finance can deliver fair value for consumers and that the overall cost of premium finance has fallen since 2022.”
Markerstudy defends its rates
A spokesman for Markerstudy, the owner of Clegg Gifford, Dial Direct and Hughes, said: “As part of our ongoing commitment to delivering good outcomes and fair value for customers, we keep our APRs under regular review. We are continuing to align rates across our portfolio and have made good progress in reducing rates across a number of brands.”
“Direct comparisons between providers can be difficult to make accurately due to the different methodologies and variables used in finance models. For example, unlike some providers, we do not charge additional fees, meaning our APRs reflect the full cost to customers.”
Impact on drivers
The finding that nine brands charge 29.9% APR means drivers paying monthly could be paying hundreds of pounds more over the course of a year. With the cost of living remaining high, consumer advocates urge drivers to compare annual and monthly costs carefully and consider paying annually if possible, or shopping around for insurers with lower finance charges.
