Millions of UK motorists are overpaying for car insurance - here’s the stealthy reason why!

Despite many motorists pinning the high cost of insurance on their driving record - experts have warned that there’s a financial sting which comes with monthly car insurance payments.

While many drivers assume paying monthly is simply a matter of convenience — much like a Netflix or Spotify subscription — the reality is more complex and costly.

Monthly car insurance often involves hidden interest charges and credit agreements that significantly increase the cost of car and other insurance products in the UK.

Eamonn Turley, insurance expert and founder of MultiQuoteTime.co.uk, explains: “While spreading the cost of car insurance over monthly payments may seem convenient, it’s important for drivers to understand the financial trade-off.

“Unlike subscription services, monthly car insurance typically comes with interest charges, which means you’re paying extra for that flexibility.

“Whenever possible, it’s worth comparing the total cost of both options before committing.”

If the average annual car insurance premium in the UK is £600, a motorist paying up front will have no added fees, whereas monthly payments may see an extra £75 added on top due to interest.

This financing model, referred to as “premium finance,” has drawn attention from the Financial Conduct Authority (FCA).

They noted: “Premium finance allows people to pay for insurance in instalments.

“With the average yearly rate on the amount of money borrowed ranging between 20 to 30%, the FCA is concerned that premium finance may not be providing fair value.”

Despite the financial inconveniences of paying monthly, there are some advantages, as it can ease pressure on monthly budgeting, and allows the costs to be spread over the entire year.

Not to mention, they can have a positive impact on your credit score if repayments are made consistently, but this does require a credit check, which will appear on the motorist’s credit file.

And if payments are missed, this can negatively impact your credit score and future access.

So, if you want to avoid the hassle, experts encourage paying annually, as there are no monthly payments to track or manage, and it is the most cost-effective option as you can avoid the stealthy interest rates.

But it depends on whether the upfront payment is suitable for your household budget.

As Turley adds: “Drivers need to look beyond convenience and consider the total cost to reduce the overall cost of car insurance in the UK.”