£624m cost of monthly car insurance

Thirteen million UK drivers paying for their car insurance monthly are spending £624 million than annual cover customers.

With motoring costs soaring, petrol now £478 more expensive than a year ago and with car insurance up four per cent, drivers are missing out on savings by paying monthly.

The average annual car insurance policy now stands at £459.44, but is £506.76 for those paying monthly.

This equates to car insurance firms charging annual interest 23.8 per cent, compared to the current personal loan best buy of 6.9 per cent, according to data from uSwitch.com.

For many motorists, spreading the cost of car insurance over 10 to 12 months makes the policy appear more manageable. However, this short-term relief costs motorists more in the long run.

Some 52 per cent of all UK policy holders choose to pay monthly and by doing so are handing over almost £50 each a year on top of the cost of the policy.

Ashton Berkhauer, insurance expert at uSwitch, said: “As insurance costs, petrol prices and general living expenses are soaring, motorists should think twice before agreeing to monthly payments on their car insurance.

“It may seem like a neat solution if you’re cash strapped but it carries a hefty interest price tag so should be avoided where possible. This really is an unnecessary expense which merely inflates the cost of the policy.”

Some insurance firms, such as Virgin, do not charge for monthly instalments, while paying for insurance by using a zero per cent offer on a credit card could also keep down costs.

“However, the actual cost of the premium should remain the key focus as the provider offering the lowest APR for monthly payments may not offer the most competitive policy price,” Mr Berkhauer added.