Car Insurance direct debit "credit" charge

mahutchinson

I have just got a quote for a car we are buying next week. All insurers now appear to be adding a charge for "credit" when paying by instalments. However, I fail to see how I am receiving any credit. I am being immediately asked to pay a larger instalment, followed by 10 smaller instalments. Not only am I paying in advance for the service each month and paying a larger instalment for the first month, I am also completing the payments in 10 months, well in advance of the end of the service. Surely a credit situation only exists when goods are received before payment is made ? Am I missing something here or is this "credit" entirely imaginary and the charge illegal ?

noh

The insurance is a yearly contract payable in advance.
You are taking a loan for the total years premium and paying the loan back in instalments.
The charge for credit is the interest charged.

Not all insurance companies make a charge for credit.

dzug1

The credit is of a year's premium, which is paid for you then repaid by instalments.

gordikin

mahutchinson wrote: »

I have just got a quote for a car we are buying next week. All insurers now appear to be adding a charge for "credit" when paying by instalments. However, I fail to see how I am receiving any credit. I am being immediately asked to pay a larger instalment, followed by 10 smaller instalments. Not only am I paying in advance for the service each month and paying a larger instalment for the first month, I am also completing the payments in 10 months, well in advance of the end of the service. Surely a credit situation only exists when goods are received before payment is made ? Am I missing something here or is this "credit" entirely imaginary and the charge illegal ?

A contender for post of the month!

stooby

The credit charge is usually added to the premium AFTER you have paid the deposit. A typical example is say premium = £100.00
You pay a 20% deposit and a (say) 10% credit charge is added to the balnce of £80.00

Premium = £100
Deposit = £20
Balance = £80
Credit Charge = 10 %
Total Balance = £88
10 payments of £8.80
Total payable = £20 + £88 = £108

Rather than £100 + 10% = £110