When it’s cheaper to buy your car insurance on credit card...

1 October 2013

car crashIf it isn’t fuel tax or road tax*, paying through the nose for car insurance is another reason why driving is getting more and more expensive. But while the insurance companies have us over that compulsory insurance barrel, it seems they are also taking advantage of us in other ways too with massive charges for monthly instalments and for cancelling a policy.

Payment by instalments is a welcome option for many people, who would otherwise be faced with the alternative of finding a big wodge of cash all in one lump. This is even more true for those whose car insurance falls due for renewal between now and January when many are saving (or paying) for Christmas.However, the rates that some insurance companies charge mean that you would be better off paying for your car insurance with a credit card, where the average APR is around 18% ; even better if you can find a 0% on purchases card.

Our friends over at Which! researched the APRs charged on monthly instalments and found that, although a couple of insurers, namely AgeUK and the NFU charged nothing or a nominal (0% and 2.75% respectively) fee for paying monthly, most insurers were indeed making hay while the sun shined. And the rates varied wildly. The next lowest fees were levied by Hastings at 14.9% and Co-operative Insurance at 18.5%, followed by Mercedes-Benz Insurance,  Admiral and Elephant all on 18.6%.

At the other end of the scale, the insurers making sure they got their money’s worth were Kwik-Fit Insurance on an eye-watering 52.32% (looks like it’s not just car repairs they rip you off with), Endsleigh on 39.7%, Allianz on 34.8%, Zurich on 33% and AXA and Swiftcover both on 32.4%.

However, Which! also looked at other fees levied on the policy, including cancellation fees. Cancellation fees are levied if the insurance is cancelled part-way through an insurance year and seems to be just another way of extracting additional money from people- especially galling for those who might give up a car to save/recoup money. Again, the level of cancellation fee varies wildly, from £0 (AgeUK, NFU, Allianz and Volvo) up to £70 (Natwest and RBS).

Overall, Which! have compiled an index of the best and worst insurers for instalment interest and all cancellation and other policy charges, which can be seen in its full glory here. Top of the shop are AgeUK, NFU and Volvo with scores of 100 or 92 out of 100. Dragging up the rear are AA (51/100), Fifty Plus (49/100) and Hastings (a pitiful 36/100)

So next time you are weighing up your lowest premium and maximum cashback calculations, make sure you factor in these costs as well. Or get yourself that cheaper credit card.

* it's not actually a tax. Or not called a tax anymore anyway.

TOPICS:   Credit Cards   Insurance   Banking

7 comments

  • jokester2
    "Again, the level of cancellation fee varies wildly, from £0 (AgeUK, NFU, Allianz and Volvo) up to £70 (Natwest and RBS)." Actually many insurance companies will charge you hundreds (or thousands) to cancel your policy, depending on the premium. Recently I tried to cancel my insurance with Adrian Flux. Despite paying £400 for the policy, and only having it 3 months with no claims or anything, they offered me £76 back..... Once they have your money, they couldn't give a fuck about you!
  • Phil
    'road tax* * it’s not actually a tax. Or not called a tax anymore anyway.' Do you mean Car Tax?
  • Captain.Cretin
    I tried to cancel a motorcycle insurance policy about 5 years ago, it was my sons and had 6 months left to run; they wanted MORE to cancel it than the remaining monthly payments. The only way I avoided paying was due to the fact they had set it up with my son and not myself or any other ADULT - you are not allowed to give credit to under 18's. As for the headline, I did this with my wife's car insurance this year' I had a 15 month, 0% offer from one of my card companies, so stuck the premium on there, along with the balance of my other cards, totally nearly £3000; I have saved ~£600 or more in interest payments.
  • Terry
    @Phil - It's not called car tax any more, either.
  • Mike O.
    @Terry - Vehicle excise duty isn't it?
  • jokester2
    I think its "Road Fund Licence" or some shit. It's still a tax though, so not calling it a tax is just ridiculous.
  • How I.
    [...] When it's cheaper to buy your car insurance on credit card… car crash 239×300 When it's cheaper to buy your car insurance on credit card.. If it isn't fuel tax or road tax*, paying through the nose for car insurance is another reason why driving is getting more and more expensive. But while the insurance … Read more on Bitterwallet [...]

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