car insurance monthly or yearly

dd95

hi all,

i have always paid my insurance in one lump sum to save costs. However I am saving money for a certain item and think that taking out 600 pound in one lump would be more detrimental as, if i keep that 600 in my savings account, it will benefit from compounding. 

jus wondering if anyone had any thoughts on this 

elsien

Do the sums. 
Work out the compound interest on your £600 - potentially almost non existent given the current interest rate, and the difference in what you'd pay to the insurer for monthly or annual payments.
That'll give you your answer. 

molerat

There are not many that do interest / charge free monthly payments on an annual policy and monthly policies are generally much more expensive than annual. Monthly payments are now generally viable only for those that simply do not have the means to pay up front.

davidmcn

The interest they'll charge you is almost certainly going to be much more than what you'd get in a savings account.

Grabs39

It depends on how much they charge you.  They could charge you 12 monthly lumps of £50 which would be beneficial for your cashflow.  However that’s unlikely (though not unheard of) and they’ll normally charge you a huge amount of interest, so for example they might charge 12x£60 leaving you £120 worse off over the year.

The interest in £600 in a savings account will be around £3 (based on 1% interest on an average balance of £300) so not worth taking into account.

dunstonh

Interest rates on insurance premiums is charged at sub-prime levels.  Typically high 20% range (sometimes higher).  Generally, the people that pay monthly are those more likely to default.   So, your 1-2% in a savings account won't come close to the 28% or whatever you pay on the loan to pay the insurance.

There are still a few providers that will not charge for monthly on house insurance though (mine doesn't but that's because the premium is £2700 and that is their typical range).

TELLIT01

£2700 for car insurance!!!  Are you a high risk driver or driving a high risk vehicle?  I pay under £500 per year.

forgotmyname

Anything upto 29.9% for paying your insurance by installments. 

What does your insurance charge for paying by installments?  19.9% maybe typical, can you get that in interest?

That is one thing that surpised me some years ago, paying by DD was easy but costly without realising it.