Car insurance news
Online car insurance site finds direct debit danger
Everyone is looking for a cheaper motor insurance premium, which is why so many people choose to get online car insurance quotes. However, once they have found a cheap car insurance quote to their liking and decide to purchase the policy, they may make one choice that results in their online car insurance premium suddenly costing hundreds of pounds more.
This choice, which can have such an impact on whether a cheap online car insurance quote really is that cheap, is paying by direct debit as opposed to in one lump sum.
Most people like to spread the cost of their motor insurance over a whole year because it is otherwise a very large outgoing which many can ill afford. Although a large proportion of these drivers do realise that paying on a monthly basis will cost them more, most believe that it is in the region of a few tens of pounds and not a more substantial amount.
However, research by MoneyExpert.com, the online car insurance comparison website, showed that an average motor insurance policy costing £762 could increase to £1,044 if paid for by direct debit.
The research found that the majority of car insurance companies require customers to pay for their motor insurance premium at more than 15% APR, which can result in these huge price increases.
Sean Gardner of MoneyExpert.com said: "[Paying by direct debit] comes at a cost - insurers argue they are making a loan to customers if they let them pay in this way.
"The consequence is that any hard work you may have put in to shopping around for a cheap deal could be in vain as savings are wiped out by the extra cost."
"The direct debit trap is always a nasty surprise and is usually discreetly hidden until the last possible moment by insurers. Customers need to be clear about all the charges they are facing and should ask for details of any financial agreement they are offered."
Some companies, such as the online car insurance firm Simple Cover, do not allow customers to pay by direct debit and use the fact that their policies can only be paid for in one lump sum as a selling point.