Car insurance monthly payments?

YesItsMe788

I'm 19 and passed my test a couple of weeks ago and I'm thinking of getting a cheap hatchback to drive around.

Now my problem is I don't know how long I will stay in my job/I'm going to uni this summer, where I won't need/be able to afford a car. When I look for insurance on these comparison websites I see the option of monthly payments but then read that's just the insurance company loaning you the money and you repaying it back to them.

So if I get an insurance policy on a monthly plan, and quit driving after 4 months say, what will happen? Will I have to pay the rest of the years repayments? Or can I just pay a cancellation fee?

Any help or experience would be appreciated. Cheers.

Oscar_The_Grouch

Hi there

Well done on passing your test.

Instalments break your premium down in to 12 equal monthly amounts and then add in interest. This is great if you are going to have the policy for a whole year.

If you cancel after 4 months (1/3 of a yr), your insurers will charge you usually about half the insurance premium. You will have paid 4 months and have to find 2 months premium pretty sharpish. Your broker will also make a charge for cancellation - usually somewhere around £50.

If you do decide to go to Uni, then I suggest that when you do you see if you can keep the policy going. Phone the insurance company and tell them that you want Third Party Only cover and cover for Social Domestic and Pleasure Purposes (no commuting) only and that your annual mileage will drop to 1,000. This should reduce your premium for the time you are at uni (and if the car is just sitting there, it's not building up any miles - just get your parents to give it a run round the block every week or so to keep the battery going.

This way, you still have a car to use during the holidays and will built up a year of no claims discount. That will reduce your premium the following year by 30%.

YesItsMe788

Thanks for the reply and the advice. When you mention 2 months premium is that just 2 months of payments or part of that? Is this standard throughout insurers?

Cheers.

ijgreer

Pretty much all insurance companies work on this basis with direct debit payments.

You will be refunded your remaining direct debit interest, but any shortfall on the time on cover along with the cancellation fee will have to be met by you.

This sum, along with the cancellation charge will amount to what you owe, which is roughly two months payments.

YesItsMe788

Oh ok, that makes sense. So would it be more financially sensible to borrow the £2k from elsewhere, pay the annual amount to the insurance company then get refunded for the remaining months when I cancel?

Thanks again.

toptip

http://www.lmgtfy.com/?q=monthly+car+insurance

Hope this helps

ijgreer

YesItsMe, that would prob be the best way, as most direct debit charges range from 10 to 15% interest, so you could save a bit of money.

YesItsMe788

ijgreer wrote: »

YesItsMe, that would prob be the best way, as most direct debit charges range from 10 to 15% interest, so you could save a bit of money.

Thanks for the advice. Makes me wish I didn't live in such a big city, if I insured out in a small village I would save £700 a year! I could say I'm living there but it could seriously screw me up if I ever got into an accident I guess.