Insurance: Annual vs. Monthly payments

[Dave200]

Hi folks.
I'm just getting a few quotes for a car I'm planning to buy via the usual comparison websites, and need a bit of a sanity check about payment terms. I've not owned/insured a car for 5-6 years, so might be mis-remembering the situation regarding monthly/annual payment.

While I can see the benefit to the insurer of having full annual payment up-front, some of the monthly quotes for the same policy have been increasing the total annual policy cost by 50-70%!

If this is the case with all providers(?), and I really am chronically out of touch with the car insurance market (the pet, home and travel policies I have don't seem to penalise so heavily), then I will certainly be paying up front. Does this match your experiences?

[Big News]

Admiral Group are silly about it - got a quote yesterday which worked out something like £620 annual, or £94 per month.

0% credit card is a better option...

[Motorrad]

NFU charge 2.8% if using them is an option. They also don't charge admin fees.

[Dave200]

Big News said:

Admiral Group are silly about it - got a quote yesterday which worked out something like £620 annual, or £94 per month.

0% credit card is a better option...

Cheers for the reply! That's interesting to hear. I have just realised that my three cheapest quotes all came from Admiral Group brands, all with crazy uplifts for monthly payment. Let's have a hunt elsewhere.

[Shaoxter]

A monthly premium is basically a finance agreement (APR should be stated somewhere) so if you can pay the annual amount upfront then do it.

[thatdude]

I've always paid upfront. For my bike, I could make the payment whenever ti was due, but with my car, I've been putting a set amount of money away each month to meet the premium come renewal time.

I can see why people like to pay monthly, but once you get suckered in you can't save up for the following year and pay the cheaper-overall annual renewal...unless you're quite well off.

[kambites]

It might well turn out to be cheaper to take out a personal loan and use it to pay up-front. Essentially, that's what you're doing when you pay monthly anyway, but if you do it through the insurers you can't choose your own loan.

[crosseyedlion]

I generally opt to keep all of my expenditure monthly (apart from my car at the mo) - so my insurance has always been that way.

For my the interest is the price of security, keeping cash in the bank means a bigger buffer in a change of circumstance and/or greater ability to take advantage of any opportunities.

I also find it much easier to manage a steady cash outflow rather than one off hits.

[BorkFactor]

Agreed - it generally comes out a lot cheaper to pay up front for some reason.

When I first got the BMW at 19 it was something like £800 up front or £2k total if you pay it monthly. Madness! I was fortunate enough that I could borrow the money from my parents and pay them back monthly, but if that isn't an option then I don't see what is wrong with a 0% credit card.

[gazchap]

I'm sure that when I first started driving back in 2004 that monthly payments on car insurance didn't add that much to the total premium, but it seems to have gone insane in the last couple of years.

Sign of the recession and credit crisis perhaps.

[Dave200]

gazchap said:

I'm sure that when I first started driving back in 2004 that monthly payments on car insurance didn't add that much to the total premium, but it seems to have gone insane in the last couple of years.

Sign of the recession and credit crisis perhaps.

Thanks all - that's at least confirmed it for me.

The above also seems to resonate - I guess there is a part of me which sees the sense in the insurers trying to make a quick buck out of people, but it did strike me as fairly steep...

[Haggleburyfinius]

gazchap said:

I'm sure that when I first started driving back in 2004 that monthly payments on car insurance didn't add that much to the total premium, but it seems to have gone insane in the last couple of years.

Sign of the recession and credit crisis perhaps.

Yup, the apr is laughable really these days.

For younger drivers it is especially onerous. The double whammy of super high premiums and massive apr is hard to overcome for a teenager operating without parental/other support.

[GroundEffect]

I save up a pot on the side for it so I can pay off in one go. No way I'm paying 30% extra just for monthly.

[Willber]

As others have said - 0% credit card is the way to go if you have the option. Either using an existing card and transferring the balance to a new one or take advantage of the 0% on purchases currently available, easy to do online!

[davamer23]

I haven't noticed a huge rise in the overall cost of insurance when paying annual upfront vs monthly.

I got these quotes yesterday for a potential bargain barge 9-5, which sold before I could get to see it,
Top 3 cheapest were;
SwiftCover Annual upfront £347.91 total cost if monthly £379.22

Axa £351.09 annual vs monthly total cost £382.69

Axa (2) more ticked cover options;Annual upfront £381.08 vs monthly overall cost £415.38

I prefer to pay annual upfront if I can but an extra £30 over a year isn't too bad an extra premium.

[MarkRSi]

I'm guessing they are factoring the payment method into their risk analysis.

In other words people who pay monthly = more likely to make a claim?

[r1ch]

I usually opt for monthly providing the difference isn't too big between annual/monthly, just how i prefer to manage my finances. Have paid up front in the past though.

[Haggleburyfinius]

MarkRSi said:

I'm guessing they are factoring the payment method into their risk analysis.

In other words people who pay monthly = more likely to make a claim?

Hmm…seems more likely that it's an easy way to make money!

[davamer23]

MarkRSi said:

In other words people who pay monthly = more likely to make a claim?

How does that work?

[Haggleburyfinius]

davamer23 said:

I haven't noticed a huge rise in the overall cost of insurance when paying annual upfront vs monthly.

I got these quotes yesterday for a potential bargain barge 9-5, which sold before I could get to see it,
Top 3 cheapest were;
SwiftCover Annual upfront £347.91 total cost if monthly £379.22

Axa £351.09 annual vs monthly total cost £382.69

Axa (2) more ticked cover options;Annual upfront £381.08 vs monthly overall cost £415.38

I prefer to pay annual upfront if I can but an extra £30 over a year isn't too bad an extra premium.

That's 10% though, which although being cheap for insurance monthlies, is ok for you due to the low premium in the first case.

Imagine that's now a factor of 10 times more expensive, like many teenagers pay, and it looks less inviting.

I lend my younger staff the premiums for their car insurance for this very reason. They then pay me back 0% over the year.