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Some drivers are being charged nearly 40% APR when paying for their car insurance monthly, according to Which?.
The consumer champion asked 39 car insurers what APRs were being applied to monthly payments and, while many didn’t respond, it found several that were charging similar interest rates to credit cards.
Among those that did respond, Which? found that 1st Central charges between 5% and 39.11%.
It gives customers a personal interest rate after a credit risk assessment, Which? said.
1st Central said: “We understand it is important to customers that we keep the price of insurance as low as possible – and benchmarking tells us that we are competitive for both annual premiums and for those that wish to pay monthly through a credit arrangement.
“We offer a range of APRs from 5% to enable us to provide credit to as many customers wishing to pay monthly as possible, including those with low or poor credit scores. Over the past quarter less than 2% of customers paid our highest APR.”
The average rate offered by insurers was found to be 23.37%.
Only two car insurers asked – NFU Mutual and Hiscox – said they do not charge interest on monthly repayments.
What about home insurance?
Which? also looked into the rates being charged on home insurance and found some insurers were charging nearly 35% APR on monthly payments.
The highest rate in the study was from Co-op Insurance, which charges between 31.31% to 34.75% APR on monthly payments.
The average across the providers that charge a rate and disclosed it was 23%.
Co-op Insurance works with partners to provide insurance cover – and it said it is looking to reduce rates where possible. It added that it chose to share its rates with Which? as it is committed to transparency.
Fifteen home insurance providers surveyed said they do not charge interest: Bank of Scotland, Halifax, Hiscox, HSBC, Lloyds Bank, MBNA, M&S Bank, Nationwide Building Society, NFU Mutual, SAGIC, Sainsbury’s Bank, Santander, TSB, Urban Jungle and Yorkshire Building Society.
