Pay car insurance in one hit to drive down the cost

IT makes sense to pay your full motor insurance premium upfront if you can afford it, as paying monthly adds £55 to the average premium.

The additional cost is even higher for younger drivers, who could pay up to £257 a year extra.

If you pay in monthly instalments, motor insurance companies charge between 6.8 per cent and 17.7 per cent in interest.

The average is 11.83 per cent, costing UK drivers £544million a year, according to a study from GoCompare Car Insurance.

Despite this, almost one in three pays monthly to spread the cost, many on low incomes who are least able to afford the extra cost.

The average comprehensive car insurance premium is £468 according to the Association of British Insurers, with the average interest rate adding £55.36.

Somebody who paid the maximum 17.7 per cent interest rate would pay an extra £82.84 a year.

The price of comprehensive cover for a typical driver aged between 17 and 24 is £1,453, and monthly interest could cost them up to £257 more.

GoCompare chief executive Lee Griffin said car insurance is generally cheaper when you make one annual payment: “The added danger is that those paying monthly are more likely to renew with the same insurer, so it can become a cycle of paying more.”

If you are paying monthly, check with your insurer or comparison site how much more it costs you.

Shopping around for a new deal could cut your premium and make paying upfront more affordable.

Alternatively, take out a credit card with zero interest on purchases, then set up a direct debit to clear the premium over 12 months.