Is it cheaper to pay monthly or annually for new car insurance? This is a commonly asked question among many vehicle owners. Keep reading to find out.
Annual car insurance
Annual car insurance is the most common payment option offered by many car insurance providers. Basically, you pay for your cover upfront for the entire year, so you won’t have to think about it for the next 12 months.
Although paying annually for auto insurance means a bigger initial payment, it does work out cheaper. Why? By paying a lump sum upfront, you don’t enter a credit agreement with your insurer that involves paying interest on the premiums calculated. This significantly reduces the costs of your car insurance.
The only downside with paying for your insurance annually is that not everyone is financially able to make a big one-off payment. In this case, your next payment option is monthly car insurance.
Monthly car insurance
Most people opt to pay for their car insurance monthly because it stretches out their payments, making it easier to manage. Unfortunately, monthly car insurance is more expensive in the long run. This is because you’re essentially taking out a 12-month loan with your provider. You’ll still have to make an initial 20% deposit of the annual amount, so you’ll pay interest on the remaining annual amount, increasing the total amount you pay for your premiums.
It’s vital to note that interest rates will vary from provider to provider, so you might end up paying more or less, depending on which insurer you choose.
Monthly car insurance is ideal for people working with a strict budget who don’t want to strain their finances. However, you need to be sure that you can make the payments every month. Missing one or multiple payments can further damage your credit score, and you could end up without car insurance.
Find your ideal car insurance
You can use our tools at Compare Insurance to find the right car insurance for young drivers, budget and needs. We have access to thousands of providers and insurance policies, allowing you to compare quotes and terms and conditions from multiple insurers at a time.