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Car Insurance -
Monthly Payment of Car Insurance More Expensive - 09/06/2008 |
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Although spreading the cost of car insurance premium over 10 to 12 months makes the payment easier for motorists, a study by uSwitch.com said they pay £50 extra each year compared to one annual payment.
From the 13 million people who choose to pay monthly, the study added, the car insurance industry is netting almost £624 million a year.
Providers charge an average APR of 23.8 per cent, which is four times more than the current best buy unsecured loan rate. And this adds extra burden on motorists who have been stretched full length by petrol price hike of 31 per cent.
A combination of the rises in fuel and insurance costs add up to £2,482, or 14 per cent of the average net salary and £500 more than a year ago.
While spreading the cost is favoured by many motorists, with the above addition, the relief is only temporary. And more than half of all UK policy holders prefer monthly payment.
Although the average insurance policy currently costs £459.44 a year, it shoots up to £506.76 for those who make monthly payments, the research revealed.
A male insuring an Audi A4 who has had a driving licence for 13 years, for example, will pay £68 more on his annual policy. This is a rise from £553.50 to £621.30 – the equivalent APR of 24.9 per cent.
An insurance expert at uSwitch.com, Ashton Berkhauer advised motorist to wisely weigh the option of paying monthly by considering that insurance costs, petrol prices and general living expenses have soared.
“It may seem like a neat solution if you are cash strapped but it carries a hefty interest price tag so should be avoided where possible,” added the expert.
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