I was thinking about paying my car insurance monthly until I saw the cost on my renewal notice for doing so: 28.8% APR representative or 12% of my premium extra.
Crikey, that’s more than most credit cards, I thought. Just to be certain I double-checked with Moneyfacts. According to their latest figures, the average APR on a UK credit card is 22.9%.
I upbraided my existing insurer (Churchill) on Twitter. They did reply, pointing out that the ‘credit agreement’ and its cost is disclosed upfront. It's also true that you have the option of making a one-off lump sum payment for no extra charge. But even so: 28.8%?
This called for a little look around to see what other insurers were charging. I decided to go through Compare The Market because it’s about time I availed myself of that cinema ticket deal. For my lovely eight-year old S-Max, I got the usual morass of deals which I whittled down to the top six. They all came in around the £260 mark (without breakdown cover). What they would charge me for a monthly payment plan however, in terms of APR, was really quite different. I won’t list them all here but the estimates ranged from 28.2% at One Call to 11.4% at Admiral.
Churchill also told me that the APR you’re offered can depend on the details you give them and the product (ie contents or car) you buy, namely it will vary from company to company and even within the insurer. I’ve taken this to mean I’m a real credit risk to them and One Call while simultaneously being a cakewalk for Admiral.
It doesn’t make sense and, actually, it’s Just Not On. You have to buy car insurance by law and it’s a captive market. For those who can’t afford a big lump sum, paying monthly really helps. The insurance industry has recently promised to reduce the huge differences in price new and existing customers pay (loyalty is not rewarded). They should be looking at payment terms too.
After all that, I ended up renewing with Churchill because I couldn’t get a better deal for the extra breakdown options I wanted with anyone else. It also meant I missed out on the meerkat movie deal, bah! I have paid my premium all in one go which was a £40 saving. I suggest everyone does the same and, if not, maybe stick it on your credit card, it’s probably cheaper.
Check out our SMM guide to car insurance here.