Research by moneyexpert.com reveals that insurers charge interest as high as 37.1% for customers that opt to spread payments for their car insurance.
MoneyExpert analysis shows APRs charged by insurers range from 0% to as much as 37.1% with many charging more than 20%. On a fully comprehensive premium of £700 opting to pay by direct debit would add more than £100 at an APR of 20% and more than £250 at an APR of 37.1%.
Tim Berry, moneyexpert.com’s insurance director, says: “Many of us struggle to afford to pay car insurance premiums in one lump sum and opting for direct debit is a good way of spreading the pain.
“However you will pay for the privilege as insurers take the view that customers are effectively taking out a loan to pay for their insurance premium and that they are taking a risk by allowing you to pay in instalments.
“Direct debit is convenient but if car buyers do opt to pay that way make sure they are aware of the charges and factor them in to your calculations when shopping around for insurance.”
Insurers’ terms for direct debit vary and will depend on how many monthly payments are needed.
Quotes may include a fee and an APR. The table below shows the companies that don’t charge interest for direct debit customers and how many payments customers need to make.
|Insurer||Policy||Number of monthly payments|
|Age Concern||Private Car Insurance||10|
|Direct Line||Private Car Policy||10|