Motorists have been warned to watch out for extortionate APR on car insurance as it’s revealed paying monthly could cost almost £500 more than if paid in one lump sum.
Research from flexible insurance provider Cuvva found that a young person insuring a Ford Fiesta could face a premium of almost £500 if they spread payments over 12 months. Data showed the average lump sum cost of this insurance would be £3,975.19, while opting to pay monthly would see that rise to £4,431.50.
In its research, which looked at some of the UK’s best-known insurance companies, Endsleigh had the biggest price difference between annual and monthly payments of £735 (£4,398.63 vs £5,132.91) and the highest APR of 39 per cent.
The average APR among five of the leading insurance companies was almost 31 per cent, which is considerably higher than the average 21 per cent APR for balance transfer credit cards from the top nine UK consumer banks.
In a survey of 2,000 people, Cuvva found about a third of motorists pay monthly for their car insurance, with more than half of these drivers saying they did so because they couldn’t afford to pay in one go.
Freddy Macnamara, CEO at Cuvva, said: “There remains a widespread lack of understanding of financial services and insurance products amongst younger UK consumers, especially when it comes to repayment plans linked to car insurance.
“This education gap is not only being inadequately addressed but many providers continue to benefit from the lack of transparency towards its customers. This is something that must be curbed, and new, more progressive players in the market can play a large part in shaping this.
“As consumers naturally look for savings and flexibility in 2021, the industry must adapt.”