MARTIN Lewis has issued an urgent warning for households to avoid paying for an essential bill monthly.
The consumer champion said to steer clear of paying for car insurance in instalments and instead pay annually.
Martin Lewis has warned drivers against paying for car insurance monthly[/caption]
In a recent poll on X, Lewis asked his followers how they pay for motor cover, with over 32% revealing they do it via monthly direct debit.
In response to the figures, Martin said he was taken aback at how many were not paying up front.
This is because when you pay monthly, the insurer classes it as you taking out a loan, charging you interest on top each month.
When you pay up front, you are charged a flat amount and aren’t charged interest on top.
Martin said: “Monthly direct debit is a LOAN – they pay the year for you and loan you the money often at 20 – 40% APR way more than a typical credit card.
“I’m shocked by how many pay by monthly DD. Avoid if at all possible.”
Martin went on to say while he understood paying for car insurance monthly can help drivers budget, the APR’s charged by many big insurers mean a cheaper option can be paying annually with a 0% credit card.
APR refers to the total cost of your borrowing for the year.
Martin added: “If you have to, most would be far better to put it on a 0% card and repay it over the 12 months.
“Or even a standard high st card with APR 20%, undercuts many big insurers who charge up to 40% APR.”
O% credit cards let you spend interest free for a set period of time, after which you are charged interest.
However, you still have to make monthly repayments and if you miss them can see your 0% interest deal removed.
But they can be a good option if you need to cover an up front cost, like an annual payment for car insurance.
How else to save money on car insurance
Tom Banks, car insurance expert from GoCompare previously told The Sun it’s worth parking your vehicle in a garage or driveway, if you have one, as parking off-road can lower the chances of it being vandalised or stolen.
“Insurers will deem you as less of a risk to insure, thereby lowering your premium,” he explained.
If you’ve got the budget, consider installing alarms and other safety devices in your car too.
“These could help bring your car insurance cost down, as well as keeping your vehicle safe,” Tom advised.
Up your voluntary excess as well – this is the maximum figure you have to pay if you are involved in an accident.
By increasing your excess, you are taking on more financial responsibility for your driving – insurers reward this by offering you a cheaper premium.
If you’ve recently added any modifications to your car, make sure they are included in your policy to ensure you’re covered as well.
If not, you may find your policy is invalidated and you’re forced to pay out over the odds in the case of an accident.
What is car insurance?
Consumer reporter Sam Walker talks you through what car insurance is and what it covers you for…
Car insurance pays out if your vehicle is stolen, damaged, catches on fire or is involved in an accident.
As a minimum, it protects you against any damage you case to other road users, the public or their property – these are called third parties.
You only need to claim on your car insurance when an accident is your fault.
If another motorist is to blame, their insurance should pay out instead.
Car insurance, unlike home insurance, is a legal requirement and if you don’t have it you can be fined up to £1,000.
You can also have your vehicle seized and destroyed.
However, you don’t need to insure your car if it is classed as “off-road”, or holds a statutory off road notification (SORN).
The vehicle has to be kept on private land and not a public highway though.
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