Lazy Tax Report 2021

Laziness rarely pays off. Those who work harder tend to get more out of life – and it’s no different when it comes to your finances.

Finder surveyed 2,076 Kiwis to find out how many are paying the “lazy tax” on their banking and utilities products – meaning they don’t think they’re getting good value for money, but haven’t switched providers in the past 6 months.

How many Kiwis are paying the lazy tax?

The research found an overwhelming 9 out of 10 Kiwis (87%) are paying the lazy tax on at least one financial product.

Income protection insurance tops the list with 54% of insured people not feeling they are getting good value for money despite not having switched in the past 6 months.

Why are people reluctant to switch providers?

Finder interviewed 8 leading economists to find out why Kiwis are reluctant to find a better deal. Overwhelmingly, experts say that the perceived time and effort of changing plans or providers leads consumers to think it’s easier or safer not to switch.

Donal Curtin, Economics New Zealand Ltd: “[Consumers] fear the process going wrong; [they] probably only have a limited idea of how much can be saved (quite a lot, in my experience).”

Brad Olsen, Infometrics: “The set-up time and costs of switching to a new provider (calls to the new and old provider, paperwork exchange, etc.) mean that many Kiwis likely can’t be bothered.”

Jen Baird, REINZ: “The administrative work required to change over often seems like a bigger task than the increased rate they believe they are paying.”

Debbie Roberts, Property Apprentice: “We are generally creatures of habit, and it is easier to stay where you are than it is to take the time and effort to switch.”

How do Kiwis compare to Aussies?

Kiwis are more likely than Australians to be paying the lazy tax in most financial products, except personal loans, home loans and credit cards.

Income protection insurance

More than half of those with income protection insurance (54%) are paying the lazy tax. Interestingly, men (58%) are more likely than women (50%) to not have switched providers despite feeling they aren’t getting good value for money.

Between the generations, gen Z (69%) are the most likely to be paying the price of laziness, compared to 51% of gen X.

How to get a better income protection insurance deal

• Adjust the benefit period. The benefit period is the maximum length of time benefits are paid to you. The longer the benefit period, the higher your premiums will be. Shortening your benefit period to 5 years or less will reduce your premiums.
• Claim premiums on tax. Income protection premiums are tax-deductible, meaning you could reduce the amount of tax you pay at the end of the financial year.
• Assess the benefit amount. Again, you need to be careful when playing around with your benefit amount, but if your expenses have gone down since you first took out the policy, you might be insured for more than you need.

Car loan

Half of Kiwis with a car loan (53%) are paying the price of laziness by not switching.

Gen Z (65%) are the most likely to be stuck with a bad deal on their car loan, compared to baby boomers (42%).

How to get a better car loan deal

• Opt for flexibility. To give yourself the option to repay your loan early and reduce the amount of interest you pay in the long run, make sure you choose a loan that doesn’t charge you extra for making additional repayments.
• Be wary of fees. Sometimes the lowest interest rate loan isn’t actually the cheapest option – you also need to factor in monthly fees and establishment fees. For instance, on a $25,000 loan over a 5-year term, an 8% interest rate with $20 monthly fees ends up being more expensive in the long run than a 9% interest rate with no fees.
• Reduce your loan term. A longer loan term can reduce your monthly payments, but will increase the total amount of interest you pay and take you longer to repay your debt. Keep your loan term as short as possible without breaking your budget.

Personal loan

Half of those with personal loans (52%) don’t think they are getting good value for money, but haven’t switched providers in the past 6 months.

Younger generations are more likely to think they are getting ripped off by their lenders. Two-thirds of gen Z borrowers (64%) are paying the lazy tax on their personal loan, compared to 54% of millennials, 51% of gen X and 38% of baby boomers.

How to get a better personal loan deal

• Get your rate down. For instance, if you took out your loan before interest rates tumbled last year, you might be able to switch to a cheaper rate. If your credit rating or banking history have improved, you might also have a shot at lowering your interest payments. You can use a personal loan calculator to compare different loan rates.
• Get smart about repayments. To minimise how much interest you pay in the long run, can you increase the size of your repayments? Take a good look at your finances and put together a plan for paying off your debt as soon as possible – even if it means cutting back on the food delivery.
• Be cautious about borrowing. A personal loan can be a handy way to pay for a wedding or a home renovation, but you need to be certain that you’ll be able to make your repayments and still afford all basic living expenses. If you can afford to dig into your savings instead, this might be a better option depending on your circumstances.

Home insurance

More than 2 in 5 Kiwis with a home insurance policy (43%) are paying the lazy tax.

Gen Z (56%) are the most likely to not switch providers despite getting poor value for money, compared to 41% of millennials and 36% of baby boomers.

How to get a better home insurance deal

• Cut back on extras. Some policies might actually cover more than what you need. For instance, you may be able to omit flood cover if you don’t live in a flood-prone area. Just make sure you don’t strip back too far – you don’t want to risk underinsurance.
• Check your excess. Your excess is how much you’ll pay out-of-pocket if you have to make a claim. Increasing your excess can reduce the cost of your premium, but it will also increase the amount you pay if you ever make a claim – so balance these wisely.
• Look for discounts. New customers typically get better deals than existing customers, so it’s a good idea to regularly compare your policy against the market to find out if you could be getting a better deal elsewhere.

Car insurance

The analysis found 1 in 3 Kiwis with car insurance (35%) are paying the lazy tax.

Gen X drivers (39%) are slightly more likely than baby boomers (32%) to be sticking with their insurer despite not getting good value for money.

How to get a better car insurance deal

• Choose your car wisely. The make and model of your vehicle can have a huge impact on your premiums. That’s because some cars are inherently safer and cheaper to repair. If you haven’t purchased your car yet, it’s worth researching which cars are the cheapest to insure.
• Drive safely. Reckless driving can also take a toll on your driving record and claims history, which can seriously drive up your premiums. Safe drivers typically get the best insurance deals because they’re less likely to be in an accident.
• Look for special deals. Finder analysis found car insurance policies can vary in price by more than $1,000 for the same car, location and driver profile. To help keep your premiums low, look for loyalty discounts or deals for new customers. Some insurers even offer discounts for taking out a policy online.

Broadband

1 in 3 Kiwis (35%) haven’t switched their broadband provider in the past 6 months despite believing they aren’t getting a good deal.

The research shows women (37%) are slightly more likely than men (32%) to be paying the lazy tax on their broadband.

How to get a better broadband deal

• Only pay for what you need. It’s common to find broadband plans offering up to 200GB of data, but not everyone needs that much. To avoid paying for what you don’t need, try Finder’s data usage calculator.
• Check out your existing providers. Some broadband providers offer discounts to customers who also have a mobile phone plan or energy plan with them.
• Look for extras. Some providers offer sign-up bonuses like half-price broadband or free media streaming for a fixed period of time. In some cases providers will even give away a laptop or appliance to lure in customers. Just be wary that you’re not paying twice as much on your plan for a sign-up bonus – and know that this will probably lock you into a contract.

Credit card

The data shows 1 in 3 credit card holders (34%) are paying the lazy tax – getting poor value for money but not taking the time to switch.

Gen Z credit card holders are more likely to be paying the lazy tax (54%) than baby boomers (30%).

How to get a better credit card deal

• Shop around. Regularly compare your credit card against others in the market. The average credit card interest rate in New Zealand is 19.4%, but there are cards on Finder with rates as low as 9.95%.
• Try a balance transfer card. A balance transfer card lets you transfer existing debt to a new card with a low- or no-interest period of up to 6 months or even longer, which can give you time to pay off some of your balance at a low cost.
• Prioritise your debts. Leaving your card in negative balance will only cost you more in interest in the long run. Try to make your repayments as soon as possible, and set yourself a budget to avoid racking up tall debts on things you don’t necessarily need.

Home loan

More than 2 in 5 home owners (43%) are paying the lazy tax on their home loan.

Gen Z borrowers (60%) are substantially more likely to not switch lenders despite feeling they aren’t getting good value for money. In comparison, just 28% of baby boomers and 29% of gen X feel the same.

How to get a better home loan deal

• Refinance. Switching to a lower home loan rate reduces your monthly repayments. Rates in New Zealand are very competitive right now, so if you haven’t compared against the market you’re probably missing out. Finder analysis found the average homeowner with a $328,347 loan over a 30-year period could save $1,081 per year in repayments by reducing their rate from 3.5% to 3%.
• Make extra repayments. If your home loan allows you to make extra repayments, this is a great way to pay off your mortgage faster and minimise the amount you pay in interest over the loan term. Most variable rate loans allow additional repayments, but not all fixed loans do.
• Look out for fees. Some loans come with a monthly or annual fee, and there are also fees involved in refinancing to a new loan. Extra fees might not be a deal breaker, but they are important to take into consideration when comparing lenders.

Mobile phone plan

1 in 4 (27%) Kiwis don’t think they are getting good value for money on their mobile plan, but haven’t switched providers in the past 6 months.

Baby boomers (30%) and gen X (30%) are the most likely to be paying the lazy tax on their mobile plan, compared to 19% of gen Z.

How to get a better mobile plan deal

• Go prepaid. Prepaid plans aren’t necessarily cheaper than postpaid plans, but they do let you stay in charge and avoid a surprising phone bill at the end of the month. You don’t want to get slammed with excess data usage or international call charges after the fact.
• Check your data usage. If your phone bill seems high, you could be paying for more data than you actually need. Most providers have an app you can use to track your data usage. If you’re not using all your data, it might be time to downgrade.
• Skip the contracts. It can be tempting to choose a phone contract and avoid paying for your phone outright – but you could end up paying more in the long run. That’s because contracts usually involve more expensive plans with higher data allowances – and take away your freedom to switch providers.