Car Insurance for Learner Driver - News Section
Car insurance by Direct Debit? No thank you
Car insurance can cost up to 35 per cent more if you pay back premiums anually by direct debit.
If you can't afford to stump up the whole cost, you are far better off paying with a low APR credit card. MoneyExpert.com figures show that the average fully comp. policy of around £760, can go up to £1026 if paying over 12 months.
Some insurers charge up to 22% for spreading out the cost of premiums and most will charge some kind of levvy. This additional cost to the consumer can mean a difference of up to £270, particulalry for younger drivers in higher risk categories.
"Motor insurance is expensive and opting to pay by direct debit is a popular way to spread the cost," said Sean Gardner, chief executive of MoneyExpert. "However, this comes at a cost - insurers argue they are making a loan to customers if they let them pay in this way. The consequence is that any hard work you may have put in to shopping around for a cheap deal could be in vain as savings are wiped out by the extra cost."
"The direct debit trap is always a nasty surprise and is usually discreetly hidden until the last possible moment by insurers. Customers need to be clear about all the charges they are facing and should ask for details of any financial agreement they are offered. Direct debit from most insurers comes at a price," Mr Gardner concluded.
There are some consumer groups where insurers won't charge extra interest if paying by direct debit. They are:
- Age Concern
- AIG Insure.co.uk
- Virgin Money
- Norwich Union
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